DeFi Loans Surge 35% to $23.723 Billion as Crypto Prices Recover

Active loans across decentralized lending applications reached an unprecedented high of $23.723 billion on May 21, according to data from Token Terminal. This surge marks a significant milestone in the DeFi ecosystem, as it exceeds the previous peak set in December 2021 by approximately $3 billion. The expansion in outstanding loans began in early April, coinciding with a broader recovery in crypto prices. Since April 8, the aggregate loans have increased by roughly $8.5 billion, driven by deeper liquidity on platforms such as Aave, Morpho, and Compound.

The growing role of permissionless credit in crypto-native trading, leveraged staking, and basis-trade strategies is evident in this surge. The total value locked (TVL) in the DeFi ecosystem, as of May 22, stands at $180.4 billion, just 6.4% below the $192.8 billion recorded on January 31. This benchmark is significant because it occurred one day before the White House confirmed an executive order activating new import tariffs, which are currently on a 90-day hold. The officialization of these tariff plans prompted a gradual 27% drop in Bitcoin (BTC) from February 1 to April 8, when it hit its lowest price level this year. The DeFi ecosystem’s TVL followed with a nearly 36% decrease in the same period.

The surge in outstanding loans and the TVL’s 6.4% shortfall indicate a market where credit demand is accelerating even as aggregate collateral remains slightly below its late-January peak. The rising loan balances suggest a greater demand for leverage among sophisticated traders. Many borrow stablecoins to finance directional BTC and ETH positions or capture basis and liquidity-mining yields. However, the collateral for those loans is the net result of borrowings in standard TVL calculations. Consequently, a simultaneous increase in borrowing and collateral withdrawals can leave overall TVL flat or even lower while credit activity accelerates. This reiterates the scenario of on-chain leverage using lending protocols.

Lending yields also play a role in this dynamic. Average supplied-USDC rates on Aave and Morpho-Aave have hovered between 6% and 8% annualized since April, well above short-dated US Treasury bills. This draws stablecoin deposits away from passive reserves and into lending pools. Higher utilization pushes loan balances upward but exerts only a muted effect on TVL because stablecoins generally enter protocols at a one-to-one dollar ratio. The record $23.723 billion in active loans and the TVL’s 6.4% shortfall highlight a market where credit demand is accelerating even as aggregate collateral remains slightly below its late-January peak.