The size of the crypto loan market had dropped by more than 43% from the peak of $64.4 billion in 2021 by the end of the fourth quarter of 2021, and fell to $36.5 billion by the end of the fourth quarter of 2024, according to a report from Galaxy Digital published on April 14th. These companies filed for bankruptcy as crypto prices fell, significantly reducing both the supply and demand for crypto loans.
The impact on CEFI loans was severe. At its peak in 2022, CEFI Lending’s total book size was $34.8 billion. By the end of 2024, this had fallen to $11.2 billion, down 68%. According to Zack Pokorny of Galaxy Digital Research, “The decline can be attributed to decimation of the supply-side lender and demand-side funds, individuals, and corporate entities.” He noted that the central lender who filed for bankruptcy is no longer operating, resulting in a significant reduction in borrowing options available in the space.
Despite the recession in the overall lending market, borrowing activities through the Decentralized Finance (DEFI) platform showed a strong recovery. After hitting $1.8 billion of open borrowings during the Bear Market in late 2022, Defi borrowings had skyrocketed to $19.1 billion by the end of 2024. This represents a 959% increase over the eight quarters. The report states that this recovery is due to the unauthorized nature of the Defi platform, in order to ensure that they can remain operational while the CEFI platforms are shut down. “Unlike the biggest Sefifie lender who went bankrupt and stopped operating, all the biggest lending applications and markets were forced to close and continue functioning,” Pokorny writes.
Defi Lending currently spans 20 lending applications and 12 blockchains, indicating that the decentralized platform remains interested in users even during the period of market volatility. In contrast, the CEFI sector is more concentrated. The three companies (Galaxy, and LEDN) account for 88.6% of all remaining CEFI loans and 27% of the crypto lending market.
Although the total market has yet to return to its previous highs, the strong performance of lending indicates a change in the structure of the crypto borrowing landscape. The report highlights that despite CEFI’s rapid contracts, the Defi platform was able to recover and expand, but even if the concentration options decline, signalling the ongoing demand for decentralized financial services.