Private Credit Market Stress Raises Risk of Crypto Contagion

Growing instability in the global private credit market is beginning to worry investors, with analysts warning that the pressure could eventually spill over into the cryptocurrency market. Recent developments involving large asset managers and private credit funds have highlighted potential risks that could affect broader financial markets, including digital assets such as Bitcoin.

Bloomberg reported that BlackRock’s $26 billion private credit fund has started restricting investor withdrawals after facing increasing redemption requests. The move reflects growing stress within the sector and follows a similar situation at Blue Owl, which reportedly sold about $1.4 billion in loans last month to handle withdrawals. Blue Owl is also said to have exposure to a failed U.K. property lender, further adding to investor concerns about credit quality within the private lending space.

The market reaction was swift. Shares of major asset management firms including BlackRock, Apollo Global Management, Ares Management, and KKR declined between 4% and 6% on Friday, extending losses seen throughout 2026. The drop highlights broader concerns that the private credit industry, which has grown rapidly in recent years, could face liquidity pressures if redemption requests continue to rise.

Andreja Cobeljic, head of derivatives trading at Swiss crypto bank AMINA Bank, warned that forced unwinding of private credit positions could trigger broader deleveraging across financial markets. Such a scenario could create additional volatility for risk assets, including cryptocurrencies like Bitcoin.

The risk becomes more significant when considering the exposure of traditional banks. U.S. banks had extended nearly $300 billion in loans to private credit providers by mid-2025, along with another $285 billion to private equity funds. If private credit stress spreads, it could affect the banking sector and amplify market instability.

Cobeljic noted that while these issues might normally be manageable, they are emerging during a period of broader global deleveraging, persistent energy price shocks, and fading expectations of interest rate cuts. In such an environment, sudden market disruptions could produce larger-than-expected ripple effects across multiple asset classes.

Another emerging concern involves the tokenization of private credit products on blockchain networks. The real-world asset (RWA) sector has expanded quickly, with tokenized private credit now approaching $5 billion in on-chain value, according to rwa.xyz. While this is small compared with the estimated $3.5 trillion global private credit market, its integration into decentralized finance (DeFi) introduces new risks.

These tokenized credit instruments allow traditional loans and funds to be issued as blockchain-based tokens and used within DeFi protocols for borrowing and lending. As more institutions experiment with these products, complex credit risks from traditional finance may increasingly enter crypto markets.

Teddy Pornprinya, co-founder of RWA protocol Plume, noted that many investors in crypto may not fully understand the underlying credit exposure within these products. High yields advertised by some tokenized credit strategies can mask underlying risks, including volatile net asset values and significant management fees.

A recent example demonstrated how traditional credit stress can affect decentralized finance platforms. In 2025, the bankruptcy of auto-parts supplier First Brands Group impacted a private credit strategy managed by Fasanara Capital. A tokenized version of this strategy, called mF-ONE, had been issued on the Midas RWA platform and was used as collateral on the Morpho lending protocol.

When the underlying fund marked down its exposure following the bankruptcy, the token’s net asset value dropped by around 2%. The decline pushed some highly leveraged borrowers close to liquidation and tightened liquidity conditions on the platform. Although lenders ultimately avoided losses, the event illustrated how off-chain financial problems can transmit risk directly into blockchain-based markets.

As institutional investors continue entering crypto through tokenized real-world assets and private credit strategies, analysts warn that vulnerabilities in traditional finance could increasingly influence the stability of digital asset markets.