Stress in the $3.5 trillion private credit market could ripple into cryptocurrency and decentralized finance through both macroeconomic contagion and tokenized credit markets, experts warn.
BlackRock’s $26 billion private credit fund has begun limiting withdrawals amid rising redemption requests, Reuters reported Friday. The move marks the latest sign of distress in the private credit sector, following similar stress at Blue Owl, which sold $1.4 billion in loans last month to meet redemptions and reportedly has exposure to a collapsed U.K. property lender.
The withdrawal restrictions have rattled equity markets. Shares of major asset managers, including BlackRock, Apollo Global Management, Ares Management, and KKR, declined 4%-6% on Friday, extending their losses throughout 2026.
Industry experts are raising an alarm about potential spillover effects into digital assets. If redemption pressure forces private credit funds to unwind positions, it could trigger deleveraging across asset classes, potentially impacting bitcoin and other cryptocurrencies, according to Andreja Cobeljic, head of derivatives trading at Swiss crypto bank AMINA Bank.
U.S. banks extended nearly $300 billion in loans to private credit providers as of mid-2025, with another $285 billion extended to private equity funds. These exposures carry risks that credit sector deterioration could extend to the traditional banking system.
“In isolation, this would be manageable,” Cobeljic said in an emailed note. “But emerging in the middle of a broader global deleveraging event, alongside an energy shock and collapsing rate-cut expectations, it is a different conversation.”
The concern centers on what happens if deleveraging becomes disorderly. For risk assets including crypto, such an unwind would represent a “significant second-order shock that current pricing does not reflect,” Cobeljic warned.
Beyond macroeconomic contagion, a more direct channel of credit risk could surface within blockchain networks themselves. Tokenized private credit products (loans and funds packaged on blockchains) have grown rapidly as part of the trend.
According to data from rwa.xyz, the on-chain private credit market now stands at just under $5 billion. While this remains tiny compared with the roughly $3.5 trillion global private credit market in 2025, the growing presence of these assets inside decentralized finance means stress in underlying loans could ripple directly to crypto markets.
“Institutions are entering crypto, but often with products that even degens and DeFi natives don’t fully grasp,” said Teddy Pornprinya, co-founder of real-world asset protocol Plume.
Real-world credit products can carry complex risks not always obvious to crypto investors, including volatile net asset value swings and headline yields that don’t fully reflect fees or credit risk, Pornprinya noted.
A recent case study demonstrates how off-chain credit stress can spill into DeFi markets. The 2025 bankruptcy of auto-parts supplier First Brands Group affected a private credit strategy run by Fasanara Capital. A tokenized version of the strategy, mF-ONE, had been issued on the Midas RWA platform and used as collateral for borrowing on the Morpho protocol.
When the underlying fund marked down exposure tied to the bankruptcy, the token’s net asset value slipped about 2%, pushing highly leveraged borrowers close to liquidation and tightening liquidity on the platform. While lenders ultimately avoided losses, the episode highlighted how tokenized private credit used as DeFi collateral can transmit traditional credit stress into on-chain markets.
See also: Binance Adds BlackRock BUIDL Tokenized Treasuries as Institutional Collateral
The BlackRock withdrawal restrictions add urgency to these concerns. As institutional capital increasingly flows into tokenized credit products, the risk that traditional finance shocks could destabilize decentralized markets grows proportionally.
The situation remains fluid, with investors monitoring whether other major asset managers will face similar redemption pressures. The combination of private credit stress, energy supply disruptions, and shifting rate expectations has created what some analysts describe as a precarious environment for leveraged positions across all asset classes, from traditional equities to digital assets.
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