Source: Cointelegraph Original: "{title}"
The scale of the crypto lending market is still far below its peak of $64 billion, but decentralized finance (DeFi) lending has seen a recovery of over 900% from the bear market lows.
Crypto lending allows borrowers to use their cryptocurrency holdings as collateral to obtain loans in cryptocurrency or fiat, while lenders can earn interest by lending out their holdings.
According to a research report released by Galaxy Digital on April 14, the crypto lending market has fallen over 43% from its historical high of $64.4 billion in 2021, dropping to $36.5 billion by the end of Q4 2024.
"This decline can be attributed to a significant reduction in lenders on the supply side, as well as funds, individuals, and corporate entities on the demand side," said Zack Pokorny, a researcher at Galaxy Digital.
Key events in crypto lending. Source: Galaxy Research
The decline in the crypto lending market began in 2022 when centralized finance (CeFi) lending platforms Genesis, Celsius Network, BlockFi, and Voyager filed for bankruptcy in succession during the two-year downturn in cryptocurrency valuations.
According to the report, their collective collapse led to an estimated 78% drop in the lending market size, with outstanding loans in CeFi lending decreasing by 82%.
Although the overall value of the crypto lending market has not yet recovered to previous highs, some indicators show that DeFi lending has achieved significant recovery.
The crypto lending market hit bottom during the bear market in Q4 2022, with outstanding loans dropping to $1.8 billion.
However, by the end of 2024, the total outstanding loans in DeFi have crossed 20 lending applications and 12 blockchains, rising to $19.1 billion, a 959% increase from the market low of 2022 over eight quarters.
"DeFi lending has experienced a stronger recovery than CeFi lending," wrote Galaxy Digital researcher Pokorny, adding:
"This can be attributed to the permissionless nature of blockchain-based applications, as well as the survival of lending applications amid the chaos of the bear market that led to the collapse of major CeFi lending platforms."
"Unlike those large CeFi lending platforms that have gone bankrupt and are no longer operating, the largest lending applications and markets were not forced to shut down completely but continued to operate," he added.
The total outstanding loans in CeFi amount to $11.2 billion, a 68% decrease from the peak total size of $34.8 billion in 2022 for CeFi lending platforms.
CeFi lending market size (quarter-end). Source: Galaxy Research
The three major CeFi lending platforms, Tether, Galaxy, and Ledn, account for 88.6% of the total CeFi lending market, representing 27% of the overall crypto lending market.
Related: Finance Redefined: Trump achieves a significant victory in the cryptocurrency space, abolishing DeFi broker rules.
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