Report: DeFi lending has grown 959% since 2022 to $19.1 billion

Source: Blockchain Knight

A recent Galaxy report pointed out that although Tether and two other companies jointly dominate the Crypto lending market, the outstanding loan amount of decentralized applications will almost double by the end of 2024.

The report shows that the size of the Crypto lending market was about $30 billion as of December 31, excluding collateralized debt position (CDP) stablecoins.

Excluding collateralized debt position stablecoins can give people a clearer understanding of the Crypto asset lending market.

The report points out that there may be overlap between the total size of the centralized finance (CeFi) loan book and the supply of CDP stablecoins.

The reason is that some specific CeFi lenders use Crypto currencies as collateral to mint CDP stablecoins, which are then lent to off-chain borrowers, which may lead to double counting.

If CDP stablecoins are included in the calculation, the market size will expand to $36.5 billion. Tether, Galaxy and Ledn account for 88.6% of the CeFi lending sector, with a total loan book of $9.9 billion. This group accounts for 27% of the total Crypto lending market including CDP stablecoins.

The market size of $36.5 billion is 43% lower than the peak of $64.4 billion in the fourth quarter of 2021. The market contraction is attributed to the collapse of multiple lending institutions and a general decline in borrower demand.

CeFi for institutions

CeFi lending mainly includes three categories: Over-the-counter (OTC) lending, prime brokerage services and on-chain private credit.

These services target institutional borrowers, offering customized terms and collateral structures, often executed through off-chain or hybrid mechanisms.

OTC lending remains more prevalent among accredited investors due to bilateral customization features such as adjustable loan-to-value ratios and maturity terms.

Prime brokers offer margin financing tied to a narrower set of digital assets and exchange-traded products.

Meanwhile, on-chain private credit allows users to deploy capital using off-chain credit protocols through on-chain liquidity aggregation.

While centralized services offer customized credit products, their reach has shrunk significantly due to increased counterparty risk and declining retail trust caused by high-profile bankruptcies in 2022-2023.

DeFi lending up 959% since 2022

In Q4 2024, open lending on DeFi protocols reached $19.1 billion, spread across 20 lending applications and 12 blockchain networks.

This is a 959% increase from the DeFi market’s open lending trough of $1.8 billion in Q4 2022. The report attributes this surge to the resilience of permissionless platforms, cross-chain capital liquidity, and the emergence of specialized lending applications.

Unlike CeFi, DeFi lending enables users to interact directly with smart contracts to borrow and lend assets without an intermediary.

Protocols such as Aave, Compound, and newer cross-chain services offer real-time transparency, flexible interest rates, and automated liquidation mechanisms. DeFi's modular design enables it to adapt to user needs, asset risks, and changing liquidity conditions.

The growth reflects users' preference for minimized trust infrastructure and the operational stability demonstrated by DeFi protocols in volatile market conditions.

Centralized entities like Tether are critical in institutional lending, the report concluded. However, the accelerated shift to DeFi platforms reflects a broader adjustment in capital flows and risk frameworks in the Crypto economy.