[AlexandrB]

I think the reason crypto investors are excited about this is that it allows them to maintain a position in a crypto coin while still extracting some liquidity - possibly to invest in other coins.

So, say you own 5 BTC and don't want to sell it because it's going "to the moon". You stake it as 200% collateral on a DeFi loan and get 2.5 BTC of liquidity you can use to buy some ETH.

What's interesting about this is that it allows the demand for coins (and therefore their value) to increase without introducing new (fiat) money into the system. I haven't done the research, but I'd be curious to know what portion of crypto trading is funded by these kinds of DeFi loans as opposed to "new" money.

[landemva]

'... it allows them to maintain a position in a crypto coin ...'

In some 'we own you and command you to pay tribute to mighty rulers from what you produce' regimes, the loan avoids a sale and the resulting tax event. In my experience, the loan can be converted to fiat money.

[lottin]

This process doesn't create new "money" as far as I can tell. Centralised exchanges can indeed inflate the supply of any crypto-currency by lowering the reserve ratio. But I think the way they pump the coins is mostly by issuing unbacked "stablecoins" and using those to buy crypto-currencies.