The crypto lending market saw a significant decline by the end of Q4 2024, with total outstanding loans estimated at $36.5 billion, well below the late 2021 peak of $64.4 billion, as highlighted by Galaxy Digital report.
The recent decline in the market can be attributed to the collapse of significant lenders on the supply side, combined with waning demand from funds, individuals, and corporations. Centralized finance (CeFi) lenders faced severe challenges during the 2022-2023 market downturn, leading to the failure of major players. Several of the largest CeFi lenders experienced significant financial distress as cryptocurrency prices dropped and market liquidity diminished. High-profile firms such as Genesis, Celsius Network, BlockFi, and Voyager eventually filed for bankruptcy amidst this turmoil.
As a result, CeFi lending, which once peaked at approximately $34.8 billion, experienced a dramatic 82% contraction, falling to just $6.4 billion. The market has become increasingly consolidated, with Tether, Galaxy, and Ledn now holding $9.9 billion in outstanding loans—representing 88.6% of the current CeFi market. This sharply contrasts Q1 2022, when Genesis, BlockFi, and Celsius collectively dominated 76% of the sector.
In contrast, DeFi lending has seen a robust recovery. By Q4 2024, open borrows across 20 lending protocols on 12 blockchains had soared to $19.1 billion—reflecting a remarkable 959% surge from the $1.8 billion low recorded in Q4 2022. Galaxy Digital attributed this strong comeback to the resilience of DeFi’s design and the solid risk management practices implemented by top on-chain platforms.
However, as the industry transitioned into 2025, new challenges emerged. The first quarter proved difficult for the broader Web3 ecosystem, with DeFi again under pressure. According to DappRadar’s Q1 2025 report, the total value locked in DeFi dropped by 27%, falling to $156 billion. This renewed decline was fueled by several notable security breaches, falling crypto prices, and persistent macroeconomic uncertainty—underscoring the sector’s ongoing vulnerability despite its recent gains.
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