While the total crypto lending market remains significantly lower than its peak in 2021, decentralized finance (DeFi) platforms are experiencing substantial growth, according to a new report from Galaxy Research.
The crypto lending market, once a booming sector during the 2021 bull run, has yet to fully recover from the harsh impact of the 2022-2023 crypto winter. However, signs of a rebound are beginning to emerge, particularly in the decentralized segment of the market, the digital asset investment firm Galaxy stated in a report published Monday.
As of the end of 2024, the total crypto lending market was valued at $36.5 billion, including loans backed by crypto-collateralized stablecoins. This represents a sharp decline from the $64.4 billion high observed during the peak of the 2021 bull run, when crypto borrowing was driven by a wave of speculative investment.
The downturn was exacerbated by the collapse of prominent centralized lenders such as Celsius, BlockFi, and Genesis, which led to a significant concentration of power within the centralized finance (CeFi) sector. Tether holds the largest market share in CeFi lending, followed by Galaxy and Ledn. Together, these three platforms control nearly 90% of the outstanding loans in the $11.2 billion CeFi loan book. Notably, CeFi lending has decreased by 68% from the early 2022 peak of $34.8 billion.
Despite the challenges facing CeFi, the report highlights the explosive growth of decentralized lending. DeFi platforms, which allow users to borrow crypto by locking up collateral without the need for a central intermediary, have seen remarkable expansion. Since the market reached its bottom in late 2022, total DeFi borrowings have surged by an incredible 959%, rising from $1.8 billion to $19.1 billion across 20 applications and 12 blockchains, according to Galaxy.
“Looking forward, the crypto lending market appears to be entering a new phase of growth,” wrote Zack Pokorny, a research analyst at Galaxy. “This growth will likely be characterized by stronger risk management practices, increased institutional involvement, and more clearly defined regulatory frameworks.”
Pokorny added, “As the sector matures, it has the potential to serve as a bridge between traditional finance and the rapidly evolving digital asset ecosystem, helping to drive wider adoption of crypto-based financial services.”
