On July 1, 2025, major lending platform Ledn stopped supporting Ether and turned into a 100% Bitcoin-focused company. While the move aligns well with the wave of Bitcoin-mania, the same focus on Bitcoin from corporations, institutions, and governments poses new threats for the Bitcoin lending business.
Full focus on Bitcoin
Ledn had plans to drop support for other cryptocurrencies aside from Bitcoin. While Bitcoin maximalists may see it as a manifestation of Bitcoin purism, the company explained the move differently: it aims to make its product simpler and focus on excelling in the only operation type–Bitcoin lending.
Regardless of the reasoning, the move is well-received among those who don’t give credit to any cryptocurrency except for Bitcoin. This audience is getting increasingly visible in this cycle.
Ledn co-founder Adam Reeds called this transition the return to the roots. Earlier, Ledn named risk management as the reason for a future halt on using clients’ assets for yield farming. The assets are kept by Ledn itself or via the company’s partners.
Bitcoin-backed loans and the current market situation
In the past, the Bitcoin lending sector saw turbulence. In 2022, Celsius, BlockFi, Voyager, and Genius were shut down. Ledn looks in the future optimistically as the Trump Administration’s efforts to make the crypto business less restrictive are good for Bitcoin-backed loans ventures. One of the main moves benefiting Bitcoin lending was the repeal of the SAB 121, a controversial 2022 rule that made crypto custody really hard.
Another trend that can serve as a tailwind for Bitcoin lending is the accumulation of Bitcoin by Bitcoin treasury companies, although their activity can have a negative impact too (we’ll speak about it too).
Companies like Strategy (formerly MicroStrategy), Nakamoto, Metaplanet, and others are buying Bitcoin in bulk. Governments accumulate Bitcoin they got through seizing, mining, and other means. Institutional custodians like BlackRock or Fidelity rapidly grow their Bitcoin accounts, too. All of these lock huge amounts of bitcoins out of the market, which leads to stabilizing the lower edge of the Bitcoin price, which is the perfect climate for Bitcoin lending companies.
The increase in the number of Bitcoin allies among institutional investors is also vital for companies like Ledn, as lending ventures need more dollars in the sector to let more operations for more people. Even in February 2025, Reeds was stating that the lending sector is “incredibly short dollars” and needs more institutional investors to allow more people to take Bitcoin-backed mortgages, etc.
Bitcoin derivatives markets (that cannot exist without Bitcoin lending) cement the BTC price stability, too. Ledn co-founder Mauricio Di Bartolomeo outlined it in his essay on responsible yield on digital assets. He writes that Bitcoin lending crushes down price volatility, makes spreads tighter, and improves the health of the spot short markets that are used as a hedge. Therefore, the market needs Bitcoin lending, and it’s another reason for companies like Ledn to come up.
New threats for Bitcoin lending
Everyone’s focus on Bitcoin may play a mean role for the lending sector. In the current cycle, individuals and institutions are reluctant to sell their bitcoins. Instead, everybody seems to try to accumulate as much as possible, and Bitcoin treasury companies, huge asset management companies, and governments lock up more Bitcoin than miners produce, effectively devouring liquidity.
At some point, lending companies may face a situation of a Bitcoin deficit available for lending out. This, in turn, may lead to an increase in borrow rates on spot short markets, a shrinkage in short interest (it may get barely profitable), and less value clarity in the market as bearish sentiment won’t be reflected adequately on the derivatives market. This means that the price will behave less predictably, and the volatility will increase. Shorting on futures markets becomes unprofitable and riskier, too. As the Bitcoin price goes up, Bitcoin bears may lose billions in liquidations.
As the short market is shrinking and borrowing Bitcoin becomes too expensive, the options market liquidity will drop. Arbitrage trading will become less flexible, which may lead to distortion in the futures market prices as they may face higher discrepancies from the spot market.
On the individual side, these problems open up more exposure to counterparty risk, trust-reliance, and the need for leverage. Ironically, all of these risks are what Bitcoin was intended to fight in the first place.
Conclusion
The crypto market and the broader financial market have complex structures, and every action contributes to various impacts, both positive and negative ones.
Heavy demand for Bitcoin by institutions, corporations, and governments may make it hard to borrow Bitcoin. It, in turn, may negatively impact the derivatives markets and lead to price volatility and liquidations on spot short markets. This may make things worse for the actor, depending on Bitcoin reserves; that’s how this circle closes. However, as the Bitcoin price stabilizes and the regulation may get friendlier, there is hope for a positive scenario.
