The crypto lending landscape has changed drastically since the last bull run. Once dominated by centralized giants, the market is now leaning toward decentralized finance (DeFi) as trust in centralized finance (CeFi) wanes. According to Galaxy Digital’s latest report, the market is recovering, but the players and power dynamics are different.
Crypto Lending Market Shrinks, But Not Dead
The crypto lending market fell to $36.5 billion in Q4 2024—a 43% drop from its $64.4 billion peak in 2021. This sharp decline started in 2022, when major CeFi lenders like Celsius, BlockFi, Voyager, and Genesis went bankrupt. The collapse of these firms dried up both the supply and demand sides of crypto lending.
Yet, the total market isn’t in freefall anymore. It has rebounded by 157% from its Q3 2023 low of $14.2 billion. Despite the shrinkage, interest in crypto lending is clearly not dead. It’s just evolving.
Crypto Lending Through CeFi: Smaller, Leaner, Concentrated
CeFi lenders took the hardest hit. From a high of $34.8 billion in 2022, their loan books shrank to $11.2 billion by the end of 2024. That’s a 68% decline. The fall of major players cleared the way for a new, more concentrated market.
Now, just three lenders—Galaxy Digital, Tether, and Ledn—control nearly 89% of CeFi crypto lending. Together, they manage $9.9 billion in loans. This shift highlights how much smaller the CeFi landscape has become, and how much more power is in fewer hands.
Galaxy Digital, once just a player in the broader crypto investment space, is now one of CeFi’s last major survivors. Its strong position signals trust and stability in a space still rebuilding its reputation.
DeFi Leads Lending Recovery
While CeFi shrank, DeFi soared. Open borrows on DeFi platforms jumped from $1.8 billion in late 2022 to $19.1 billion by the end of 2024. That’s a 959% increase over just two years.
DeFi’s rise is linked to its core strength—permissionless access. When CeFi lenders went under, DeFi protocols kept running. No centralized gatekeepers meant no shutdowns. That reliability mattered during the chaos.
Today, DeFi lending spans 20 applications and 12 blockchains. It’s not just recovering; it’s expanding. And it now accounts for 63% of total crypto borrowing—almost double its share during the last bull market.
Crypto Lending Trends Show Power Shift Toward DeFi
The market used to be CeFi’s playground. Not anymore. DeFi platforms and crypto-backed CDP stablecoins now dominate 69% of the lending space. The days of relying solely on centralized lenders are gone.
Galaxy Digital’s report highlights that smart risk management and decentralized design helped DeFi protocols stay functional through the bear market. This has earned them more trust and usage, especially from users burned by CeFi collapses.
Meanwhile, CeFi lenders have become more specialized. Some only offer BTC-backed loans or operate in specific jurisdictions. This selective approach limits growth but adds clarity on what each lender brings to the table.
Venture Capital Pulls Back From Crypto Lending
Funding has also slowed. Between Q1 2022 and Q4 2024, lending and credit platforms raised $1.63 billion across 89 deals. But investment peaked early—in Q2 2022—with $502 million. By Q4 2023, funding dropped to just $2.2 million.
VCs are still in the space, but more cautiously. Lending and credit apps only averaged 2.8% of total VC investment in crypto during this period. The money is still flowing—just not as fast or freely.
