Ethereum News Today: DeFi's $73.6B Credit Surge Powers Coinbase's ETH Loan Expansion

Coinbase has launched ETH-backed loans, enabling users to borrow up to $1 million in USDC by collateralizing ether, marking a significant expansion of its onchain lending product according to The Block. The feature, powered by the Morpho lending protocol on Base, targets long-term crypto holders seeking liquidity for expenses such as down payments or debt refinancing without triggering taxable events. This move aligns with broader trends in decentralized finance (DeFi), where onchain credit markets have surged to $73.6 billion in the third quarter of 2025—the highest quarterly total on record.

The ETH-backed loan product follows Coinbase's earlier success with BTC-backed lending, which has facilitated $1.25 billion in borrowing against $1.38 billion in collateral from 16,000 customers. Borrowers can draw up to 75% of their collateral's value, with liquidation risks kicking in at an 86% loan-to-value (LTV) ratio. Interest rates are dynamically set by supply and demand on Morpho, and the service is available to verified U.S. users (excluding New York) with international expansion planned according to reports.

Coinbase's foray into ETH lending reflects intensifying competition among crypto platforms to replicate traditional banking functions. DeFi protocols like Aave have similarly expanded into retail services, launching apps that offer over 6.5% annualized yields on deposits. Aave's consumer-focused initiatives, including balance protection up to $1 million and integration with Apple's App Store, highlight a sector-wide push to attract mainstream users according to analysts. Meanwhile, traditional banks are lobbying regulators to extend stablecoin interest bans to crypto platforms, signaling growing regulatory scrutiny.

Institutional activity also underscores confidence in crypto's evolving financial infrastructure. BlackRock recently transferred $467.19 million in BTC and $175.93 million in ETH to Coinbase, a move analysts interpret as strategic liquidity management. Such inflows often correlate with increased market volatility, as large institutional movements can influence price dynamics. However, crypto funds faced $2 billion in outflows last week, with Bitcoin and Ethereum ETFs shedding $1.38 billion and $689 million, respectively according to Seeking Alpha. CoinShares attributes these outflows to macroeconomic uncertainty and selling by crypto-native "whales," though retail investors continue to allocate capital to altcoin ETFs like those tracking Solana and XRP according to CryptoSlate.

Market participants remain divided on the implications of these developments. JPMorgan analysts noted that November's crypto sell-off stems primarily from retail ETF redemptions rather than broader risk-averse sentiment, as equities saw $96 billion in retail inflows同期. Conversely, CoinShares' James Butterfill warned that sustained outflows could signal deeper structural challenges, particularly if macroeconomic conditions deteriorate.

Coinbase's ETH loans and competing DeFi innovations suggest the industry is still in a transformative phase, balancing rapid product expansion with regulatory and market risks. As platforms like Aave and Morpho continue to blur lines between traditional and decentralized finance, the coming months will test whether these services can sustain user trust amid a volatile macro environment according to Cointelegraph and according to Coindesk.