The crypto lending market’s size remains significantly down from its $64 billion high, but decentralized finance (DeFi) borrowing has made an over 900% recovery from bear market lows.

Crypto lending enables borrowers to use their crypto holdings as collateral to obtain a crypto or fiat loan, while lenders can loan their holdings to generate interest.

The crypto lending market is down over $43%, from its all-time high of $64.4 billion in 2021 to a total of $36.5 billion at the end of the fourth quarter of 2024, according to a Galaxy Digital research report published on April 14.

“The decline can be attributed to the decimation of lenders on the supply side and funds, individuals, and corporate entities on the demand side,” according to Zack Pokorny, research associate at Galaxy Digital.

Crypto lending key events. Source: Galaxy Research

The decline in the crypto lending market started in 2022 when centralized finance (CeFi) lenders Genesis, Celsius Network, BlockFi and Voyager filed for bankruptcy within two years as crypto valuations fell.

Their collective downfall led to an estimated 78% collapse in the size of the lending market, with CeFi lending losing 82% of its open borrows, according to the report.

While the overall value of the crypto lending market has yet to reach its previous highs, DeFi lending made a significant recovery according to some metrics.

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DeFi borrows grow nearly tenfold

The crypto lending market found its bottom at $1.8 billion in open borrows during the bear market in the fourth quarter of 2022.

However, DeFi open borrows rose to $19.1 billion across 20 lending applications and 12 blockchains by the end of 2024, representing a 959% increase over the eight quarters from the 2022 market bottom.

“DeFi borrowing has experienced a stronger recovery than that of CeFi lending,” wrote Galaxy Digital’s research associate, Pokorny, adding:

“This can be attributed to the permissionless nature of blockchain-based applications and the survival of lending applications through the bear market chaos that felled major CeFi lenders.”

“Unlike the largest CeFi lenders that went bankrupt and no longer operate, the largest lending applications and markets were not all forced to close and continued to function,” he added.

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Meanwhile, outstanding CeFi borrows are worth a collective $11.2 billion, which is 68% lower compared to the peak $34.8 billion combined book size of the CeFi lenders achieved in 2022.

CeFi Lending Market Size by Quarter End. Source: Galaxy Research

The three largest CeFi lenders, Tether, Galaxy and Ledn, account for a combined 88.6% of the total CeFi lending market and 27% of the total crypto lending market.

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