Crypto Lending Market Shrinks 43% as CeFi Collapses, DeFi Borrowing Surges 959%

The crypto lending market has experienced a notable decline, with its size decreasing by 43% from its peak of $64.4 billion in 2021 to $36.5 billion by the end of the fourth quarter of 2024. This downturn is primarily due to the collapse of major centralized finance (CeFi) lenders such as Genesis, Celsius Network, BlockFi, and Voyager, which filed for bankruptcy in 2022 as crypto valuations fell. The collective downfall of these lenders resulted in an estimated 78% collapse in the size of the lending market, with CeFi lending losing 82% of its open borrows.

Despite the overall decline in the crypto lending market, decentralized finance (DeFi) borrowing has shown a remarkable recovery. DeFi open borrows surged by 959% from the bear market bottom of $1.8 billion in the fourth quarter of 2022 to $19.1 billion across 20 lending applications and 12 blockchains by the end of 2024. This significant increase can be attributed to the permissionless nature of blockchain-based applications and the resilience of DeFi lending platforms, which continued to function despite the bear market chaos that led to the bankruptcy of major CeFi lenders.

The recovery of DeFi borrowing is in stark contrast to the performance of CeFi lending, which has yet to reach its previous highs. Outstanding CeFi borrows are currently 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. 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.

The decline in the crypto lending market can be attributed to the decimation of lenders on the supply side and funds, individuals, and corporate entities on the demand side. The collapse of major CeFi lenders has led to a significant reduction in the size of the lending market, with CeFi lending losing 82% of its open borrows. However, the resilience of DeFi lending platforms has enabled them to make a significant recovery, with DeFi open borrows surging by 959% from the bear market bottom. This recovery 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.