According to Cointelegraph, the crypto lending market has experienced a notable shift, with decentralized finance (DeFi) borrowing showing a remarkable recovery despite the overall market downturn. The market, which allows borrowers to use their crypto assets as collateral for loans, has seen its size decrease significantly from its peak of $64.4 billion in 2021 to $36.5 billion by the end of 2024, marking a decline of over 43%. This downturn is largely attributed to the collapse of several centralized finance (CeFi) lenders, including Genesis, Celsius Network, BlockFi, and Voyager, which filed for bankruptcy as crypto valuations plummeted.
The downfall of these CeFi lenders led to a dramatic 78% reduction in the lending market size, with CeFi lending experiencing an 82% drop in open borrows. Despite this, DeFi lending has shown a robust recovery, with open borrows increasing nearly tenfold from the bear market low of $1.8 billion in the fourth quarter of 2022 to $19.1 billion by the end of 2024. This 959% increase over eight quarters highlights the resilience of DeFi platforms, which have benefited from their permissionless nature and ability to withstand the market chaos that affected major CeFi lenders.
Galaxy Digital's research associate, Zack Pokorny, noted that DeFi borrowing has outpaced CeFi lending recovery due to the continued operation of blockchain-based applications, which were not forced to close like their CeFi counterparts. As of now, outstanding CeFi borrows stand at $11.2 billion, a 68% decrease from the peak of $34.8 billion in 2022. The three largest CeFi lenders—Tether, Galaxy, and Ledn—dominate the market, accounting for 88.6% of the total CeFi lending market and 27% of the overall crypto lending market. This shift underscores the growing importance of DeFi in the crypto lending landscape, as it continues to recover and expand despite the challenges faced by traditional CeFi lenders.
