DEFI leverage is back at 2021 levels, but not how you'd think

DeFi's on-chain leverage ratio is back at levels not seen since the 2021 bull market. But the cause is not a fresh wave of speculative borrowing. It is something more troubling: the capital base underneath existing loans has quietly collapsed.

How the ratio climbed without traders piling in

The on-chain leverage ratio across decentralized finance has climbed to levels last seen in 2021, according to @BinanceResearch. While the metric may suggest elevated risk, the increase was driven largely by a decline in total value locked (TVL) rather than a surge in borrowing demand. The ratio climbed because the denominator, TVL, collapsed, not because borrowing activity surged. The on-chain leverage ratio measures how much borrowing and leveraged activity exists relative to the capital locked across DeFi protocols. When TVL shrinks sharply while outstanding loans stay roughly constant, the ratio rises mechanically.

According to Binance's May market insights, DeFi TVL fell 10.7% month over month to about $82.7 billion by the end of April. The on-chain DeFi leverage ratio rose to about 38%, matching 2021 highs, driven by TVL compression rather than increased borrowing.

April's exploit wave and the $13 billion exodus

In the span of just 18 days in April 2026, decentralized finance lost more than $606 million to hacks and exploits across at least a dozen incidents. Two attacks alone, the $285 million breach of Solana-based perpetuals DEX Drift Protocol on April 1 and the $292 million drain of KelpDAO's rsETH on April 18 to 19, accounted for roughly 95% of the month's total losses.

@BinanceResearch notes that April's exploit wave, led by major incidents at KelpDAO and Drift Protocol, triggered a much larger $13 billion rush for the exits as users yanked liquidity from lending markets and yield platforms. Protocols suffered $635.24 million in exploits during the month, the highest monthly total since the Bybit incident in February 2025. DefiLlama counted 28 hack events during April, which Binance called a record monthly count.

According to Binance Research, the KelpDAO exploit resulted in roughly $230 million in bad debt on Aave and cut the protocol's TVL by about half. The contagion spread quickly. Ethereum and Solana also saw substantial declines in total capital within their DeFi protocols over the month, with Ethereum losing $1.6 billion to outflows on April 24 alone.

The broader concern flagged by @BinanceResearch is that leverage remains elevated even as the market has pulled back. Meaningful deleveraging has yet to materialize, Binance Research said. As leverage remains elevated relative to a shrinking DeFi capital base, the market could remain vulnerable to further liquidations and position unwinds if prices weaken further. Although losses from attacks declined by nearly 90% in May compared with April, risks to the sector remain elevated.

Sources:
Binance Research Flags Record April DeFi Hacks, Triggering $13B Liquidity Exodus – BanklessTimes
Black April 2026: $606M Stolen, $13B TVL Exodus – CryptoTimes
Why DeFi Is Not Dead After the KelpDAO Exploit – CoinDesk