Ultra-wealthy use DeFi loans — bitcoin and ether collateralize luxury spending
Wealthy crypto holders are increasingly using decentralized finance (DeFi) platforms to secure quick, flexible credit lines without selling digital assets. Cometh founder Jerome de Tychey says family offices and high-net-worth individuals are using protocols like Aave, Morpho and Uniswap to pledge bitcoin (BTC), ether (ETH) and stablecoins as collateral, replicating Lombard-style loans. DeFi loans can settle in seconds and offer greater anonymity than traditional bank credit, avoiding credit checks and lengthy processing. Risks include price volatility, smart-contract counterparty issues and automatic liquidations if collateral falls. Cometh, now MiCA-licensed in France, is also experimenting with ISIN-based tokenization to apply DeFi techniques to traditional securities, a “tradfi-cation” of DeFi. The trend reflects growth in crypto wealth — a 2025 Henley & Partners survey reported about 241,700 crypto millionaires, up 40% year-on-year — and points to rising demand for on-chain credit solutions among ultra-rich clients seeking liquidity for lifestyle spending while retaining crypto exposure.
Neutral
This development is market-neutral overall. It signals growing institutional and high-net-worth adoption of DeFi credit products, which supports demand for major crypto assets used as collateral (notably BTC and ETH) and could underpin longer-term price support. Faster access to liquidity without selling holdings reduces forced-sell pressure, which can be bullish in some scenarios. However, DeFi credit also increases systemic risk from leverage, smart-contract vulnerabilities and liquidation cascades — factors that can amplify short-term volatility and trigger sell-offs if a market shock occurs. Historical parallels: 2020–21 growth in crypto-backed lending expanded liquidity and supported prices, but episodes like the 2022 LUNA/UST collapse and 2023 CeFi failures show leveraged and poorly collateralized credit can swiftly become bearish. For traders: expect modest structural support for majors over the medium term, but heightened sensitivity to volatility and liquidation risk in short-term price action. Watch on-chain borrowing metrics, collateralization ratios on Aave/Morpho and stablecoin circulation for early signals; monitor regulatory moves (MiCA adoption) that could reduce friction for institutional flows.