The cryptocurrency lending landscape has undergone a dramatic transformation, highlighting the contrasting paths of centralized finance (CeFi) and decentralized finance (DeFi) from their peaks to the end of 2024. The total crypto lending market contracted by over 43%, from $64.4 billion in 2021 to $36.5 billion by Q4 2024.
CeFi lending was particularly affected, plummeting 68% from its 2022 peak due to significant lender bankruptcies such as Celsius and Genesis. From a book size of $34.8 billion, it shrank to $11.2 billion by 2024. The collapse of these key players restricted borrowing options within the centralized ecosystem, leading to foundational issues on both the supply and demand sides.
In contrast, DeFi borrowing experienced remarkable growth, surging 959% from its late 2022 low to $19.1 billion by Q4 2024. The resilience of DeFi is attributed to its permissionless and decentralized nature, which allowed lending applications to continue operation despite the downturn affecting their CeFi counterparts.
This shift has reshaped the crypto lending ecosystem. The CeFi market became more concentrated, now dominated by Tether, Galaxy, and Ledn, which together account for 88.6% of CeFi lending and 27% of the total crypto lending market. Meanwhile, DeFi remains more distributed, spread across 20 lending applications on 12 blockchains.
While the market has not regained its 2021 heights, the strong recovery in DeFi borrowing indicates a structural shift towards decentralized financial services and a diminished role for CeFi. This trend reflects changing market preferences towards resilient and decentralized alternatives.
