DeFi active loans hit a record high of $23.7 billion, with TVL 6.4% lower than before tariffs

Source: Blockchain Knights

According to Token Terminal data, as of May 21, the size of active loans in decentralized lending applications climbed to an all-time high of $23.723 billion.

Meanwhile, the TVL of the DeFi ecosystem has fallen 6.4% from its level on January 31, the day before former US President Donald Trump formally proposed his import tariff proposal.

The surge in outstanding loans continues the expansion that began in early April, when the lending market regained momentum as prices of broader Crypto assets recovered.

Token Terminal data shows that total loan size has increased by about $8.5 billion since April 8, driven by the deepening of liquidity in Aave, Morpho and Compound.

The $23.723 billion in active loans is about $3 billion higher than the previous cycle peak set in December 2021, highlighting the growing role of permissionless credit in crypto-native trading, leveraged staking, and basis trading strategies.

DefiLlama’s global dashboard shows that as of May 22, DeFi’s TVL was $180.4 billion, just 6.4% lower than the $192.8 billion TVL registered on January 31.

This benchmark is significant because it occurred the day before the White House confirmed the signing of an executive order activating new import tariffs, which are currently in a 90-day suspension period.

The official announcement of the tariff plan prompted a gradual 27% drop in BTC prices from February 1 to April 8, hitting its lowest price level this year on April 8.

Over the same period, the TVL of the DeFi ecosystem has also fallen by nearly 36%.

In addition, collateral, mainly in Ethereum, ETH-collateralized derivatives, and stablecoins, has also shrunk accordingly, bottoming out at around $110 billion in mid-March.

The rise in loan balances points to a growing demand for leverage among professional traders. Many are borrowing stablecoins to fund long positions in Bitcoin and Ethereum, or to capture basis trading and liquidity mining yields.

However, the collateral for these loans is the net result of lending activity in the standard TVL calculation.

Therefore, the simultaneous increase in lending and collateral withdrawals could result in a flat or even declining overall TVL, while lending activity is accelerating. This again confirms the scenario of leveraging on-chain using lending protocols.

Lending yields also play a role. Since April, the average annualized interest rate on USDC deposits on Aave and Morpho-Aave has fluctuated between 6% and 8%, well above short-term U.S. Treasury yields.

This has prompted a shift in stablecoin deposits from passive reserves to lending pools. Higher utilization has driven up loan balances, but has had limited impact on TVL, as stablecoins typically enter the protocol at a 1:1 ratio with U.S. dollars.

The record active loan size of $23.723 billion and the 6.4% TVL gap suggest that market demand for credit is accelerating even as total collateral size remains slightly below its peak at the end of January.