The size of the crypto loan market has dropped significantly from its $64 billion high, but decentralized finance (DEFI) borrowings have resulted in a recovery of over 900% from the low bare market.
Crypto lending allows borrowers to obtain crypto or fiat loans using crypto holdings as collateral, while lenders can lend ownership to generate interest.
The crypto lending market exceeds 43%, from a record high of $64.4 billion in 2021 to a $36.5 billion at the end of the fourth quarter of 2024, according to the Galaxy Digital Research Report, issued on April 14th.
“The decline can be attributed to decimation of supply-side lenders and demand-side funds, individuals, and business associations,” according to Zack Pokorny, a research associate at Galaxy Digital.
Crypto financing important events. Source: Galaxy Research
The decline in the crypto loan market began in 2022 when Centralized Finance (CEFI) lenders Genesis, Celsius Network, Blockfi and Voyager filed for bankruptcy when the crypto valuation fell within two years.
Their collective downfall has resulted in a repeated collapse of the lending market by an estimated 78%, losing 82% of borrowings where CEFI loans have been opened, according to the report.
The overall value of the crypto loan market has yet to reach its previous highs, but according to some metrics, Defi Lending has recovered significantly.
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Defi borrowing grows almost ten times
Crypto Lending Market discovered its bottom of $1.8 billion open borrowing in the Bear Market in the fourth quarter of 2022.
However, by the end of 2024, Defi Open Lonows had risen to $19.1 billion over 20 lending applications and 12 blockchains, up 959% over eight quarters from the market bottom in 2022.
“Defi Lonowing is experiencing a stronger recovery than its CEFI loan recovery,” wrote Pokorny, research associate at Galaxy Digital.
“This could be attributed to the unauthorized nature of blockchain-based applications and the survival of lending applications through the disruption of the Bear Market that has overthrew the major Sefifian lenders.”
“Unlike the biggest Sefifie lender who went bankrupt and stopped operating, all the biggest lending applications and markets were forced to close and continue functioning,” he added.
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The outstanding CEFI borrowing is worth the collective $11.2 billion. This is 68% lower than the CEFI lenders’ total book size of $34.8 billion achieved in 2022.
Quarterly CEFI lending market size. Source: Galaxy Research
The three largest CEFI lenders, Tether, Galaxy and LEDN, combine 88.6% of the total CEFI lending market and 27% of the total crypto lending market.
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