It’s a sea change for the cryptocurrency lending landscape. Decentralized finance (DeFi) platforms have officially taken the lead over centralized or CeFi platforms as the crypto market continues to come alive after the unprecedented bear phase. A recent report by Galaxy Digital highlights this divergence, revealing that while DeFi lending has reached new peaks, CeFi lending remains significantly below its previous highs. The subsequent collapse of major CeFi platforms like Celsius and BlockFi has only added to this disparity.
The CeFi lending market may have regained some ground, but it is still 68% down from its 2022 high. The cumulative value of outstanding CeFi borrows as of Q4 2024 was $11.2 billion. As of Q4 2024, the three largest lenders in the CeFi market—Tether, Galaxy, and Ledn—now control a staggering 89% market share. It’s quite the jump from their historically dominant 75% control last year.
DeFi lending is still recovering, but doing so with overwhelmingly strong numbers. This in turn has become the primary engine powering growth in the crypto lending space. The crypto lending market experienced a 214% rebound from Q4 2022 to Q4 2023, not counting CDP stablecoins. Surprisingly, DeFi lending applications accounted for only 34% of the market share even during the bull run of 2020-2021. Since then, they’ve gone through a tremendous boom, increasing by 959% from Q4 2022 to Q4 2024.
Developments in DeFi, particularly lending, have since rebounded tiger blood-style. It has now broken above its former bull market high by a remarkable 18%. By the end of Q4 2024, DeFi lending had climbed to $19.1 billion in total open borrows. Platforms such as Aave and Compound have exploded in growth. They have seen an incredible recovery from a bear market low of $1.8 billion in open borrows.
“Aave and Compound, has seen strong growth from the bear market bottom of $1.8 billion in open borrows. There were $19.1 billion in open borrows across 20 lending applications and 12 blockchains at the conclusion of Q4 2024,” - Galaxy
This growth is an important reminder of the market’s emerging demand for more decentralized, peer-to-peer solutions in the crypto lending space.
The resulting concentration of power among the top three CeFi lenders is reflective of a broader potential change in market dynamics. The CeFi market share held by Tether, Galaxy and Ledn increased from 75% in 2022 to 89% in Q4 2024. This consolidation is perhaps a signal of a flight to safety and reliability after the recent CeFi collapses.
According to Galaxy Digital, the 2022 bear market really put a stop to CeFi lending. This was largely driven by the collapse of major lenders and borrowers, making a significant contribution to this one-sided recovery.
“This is largely due to the lack of recovery in CeFi lending after the 2022 bear market and the decimation of the largest lenders and borrowers in the market,” - Galaxy Digital
Additionally, regulatory factors can play a role in explaining why CeFi and DeFi lending are on such different trajectories.
“Most CeFi firms do not offer yield products to US clients since 2022. DeFi platforms often don’t comply with these regulations nor require KYC, which could be a factor,” - Ledn’s co-founder Mauricio Di Bartolomeo
