The cryptocurrency sector is witnessing increased interdependencies between centralized finance (CeFi) and decentralized finance (DeFi) platforms, leading to heightened systemic risk. A recent report by Galaxy Digital Research highlights that, as of March 31, 2025, there was over $39 billion in crypto-collateralized debt across DeFi applications, centralized lenders, and crypto-backed stablecoin issuers. DeFi protocols accounted for 45.3% of this total, centralized venues for 34.6%, and collateralized stablecoins for 20.1%. 

The report points out that many centralized entities obtain short-term liquidity through DeFi channels and subsequently lend these funds off-chain. This practice results in the same debt obligations being recorded both on-chain and in private ledgers, leading to inflated borrowing figures and complicating real-time risk assessments during market volatility.

In scenarios of sharp price declines, automated liquidations are often triggered first on DeFi platforms due to their smart contract mechanisms. Centralized desks that have borrowed from DeFi may then respond by recalling loans or liquidating client collateral on exchanges, further exacerbating price pressures. 

These complex interconnections underscore the need for enhanced risk management strategies and regulatory oversight to mitigate potential systemic threats within the evolving crypto financial landscape.