Leveraged lending involves borrowing funds to invest in cryptocurrencies, aiming to amplify potential returns. In this process, individuals or institutions use their existing assets, like cryptocurrencies, as collateral to secure loans.The key aspect of leveraged lending is the use of borrowed capital to increase the size of an investment. For instance, an investor might borrow money to purchase more cryptocurrency than they could afford outright, anticipating that the asset will appreciate in value. If the investment performs well, the borrower can pay back the loan and keep the excess profits.However, leveraged lending carries significant risks. If the value of the investment drops, the borrower still owes the full loan amount. This could lead to margin calls, where the lender demands additional collateral or repayment, potentially resulting in forced liquidation of assets at unfavorable prices.Thus, while leveraged lending can enhance gains, it can also lead to substantial losses, making it crucial for participants to carefully assess their risk tolerance and market conditions.