Sberbank, Russia’s largest bank, has issued the country’s first-ever crypto-backed loan. The bank says it issued the loan to Intelion Data, one of Russia’s biggest Bitcoin miners. It did not disclose the size of the loan, nor the amount of crypto used to secure it. “The loan was secured by digital currency mined by [Intelion Data],” Sberbank wrote in an official release. “We believe this product will be relevant not only for cryptocurrency miners, but also for companies that own cryptocurrencies.” As B ...

Core Insights - Leveraged borrowing, also known as looping, is a significant driver of financial activity in decentralized finance (DeFi), accounting for approximately 30% of all activity in the $250 million DeFi market on Ethereum [1][2] Group 1: Market Dynamics - The majority of lending and borrowing positions in major lending markets like Aave, Spark, Morpho, Compound, and Euler are attributed to looping strategies [2] - The looping strategy involves depositing a cryptocurrency, borrowing another asset, and using that borrowed asset to buy more of the original cryptocurrency, thereby increasing leveraged exposure [3] Group 2: Evolution of Strategies - The looping strategy has evolved with the introduction of new cryptocurrencies, such as staked Ether, which traders use to enhance their exposure to annual percentage yields [4] - The availability of yield-bearing stablecoins has led to increased interest in looping these against non-yielding stablecoins [4] Group 3: Risks and Considerations - The presence of pent-up leverage in crypto markets has historically led to significant collapses, indicating potential risks associated with looping strategies in DeFi [5] - The concept of "no free lunch" in finance suggests that increased leverage through looping could lead to systemic risks and black swan events over time [5][6]