The Resurgence of Crypto Lending: CeFi and DeFi Battle for Dominance
In the aftermath of the crypto lending crisis of 2022-2023, which saw industry giants like BlockFi, Celsius, Voyager, and Genesis unravel, the landscape of crypto lending has begun to transform. These collapses wiped out a staggering $25 billion in loans and severely damaged the sector’s credibility. Yet, according to a new report from Galaxy Digital, a revival is underway with a familiar set of survivors leading the charge.
The New Leaders in Centralized Crypto Lending
Today, Tether, Galaxy Digital, and Ledn have emerged as the dominant players in centralized finance (CeFi) lending. These three entities currently hold a combined $9.9 billion in outstanding loans as of the end of 2024, capturing nearly 90% of the CeFi market, as reported by Galaxy’s research associate Zack Pokorny.
At the peak of centralized crypto lending in late 2021 and early 2022, Genesis, Celsius, and BlockFi controlled 76% of the market. However, the subsequent crash, fueled by declining token prices, poor risk management, and unstable collateral, led to an industry-wide credit readjustment. By Q1 2023, the CeFi loan book had shrunk dramatically to $6.4 billion. Although it has since rebounded to $11.2 billion—a 73% recovery—it remains significantly lower than its previous high.
Filling the void left by their predecessors, Tether has become a significant lender, while Galaxy Digital, under the leadership of billionaire Mike Novogratz, claims to operate one of the largest active loan books in the industry. Ledn, a Toronto-based bitcoin-centric lender, completes this new triumvirate. Together, these entities manage 89% of the remaining centralized crypto lending market and account for 27% of the overall crypto lending market, including crypto-backed stablecoins.
The Rise of Decentralized Finance (DeFi)
While centralized lenders have been recovering, decentralized finance (DeFi) protocols have quietly expanded their market share. Platforms such as Aave and Compound, which operate autonomously through code, have gained traction by requiring borrowers to provide more collateral than they borrow. This approach reduces the credit risk that has historically plagued centralized lending.
At the trough of the bear market in Q4 2022, DeFi borrowing had diminished to a mere $1.8 billion. Since then, it has surged more than tenfold to $19.1 billion across 20 platforms on 12 blockchains. Ethereum continues to be the leading blockchain for DeFi lending, with $33.9 billion in assets deposited as of March 2025, underscoring lending as the primary use case for decentralized finance.
Crypto-backed stablecoins like the $7 billion USDS and the $5 billion Ethena USDe add further complexity. These stablecoins utilize unique mechanisms to maintain their value. For instance, USDS users lock cryptocurrencies like ether into smart contracts as collateral, while USDe employs a delta-hedging strategy, pairing crypto collateral with short positions in derivatives markets to stabilize its $1 peg. Galaxy Digital notes potential double-counting between centralized and decentralized loan books, as institutional lenders often leverage these DeFi protocols to originate loans for clients.
The Future of Crypto Lending
According to Sid Powell, CEO and cofounder of Maple Finance, an institutional lender operating on the blockchain with a $300 million loan book, “The rate for borrowing against bitcoin is now hovering between 5.5% and 7%, down from recent months. Although many are hesitant due to ongoing tariff wars, the lending market remains relatively strong.”
Powell highlights several factors that could influence the market’s trajectory, such as the stabilization of the 10-year yield and potential rate cuts by the Federal Reserve, which could positively impact crypto asset prices.
Institutional reentry into the market appears to be gaining momentum. In July, Cantor Fitzgerald, Tether’s primary collateral custodian, announced a $2 billion bitcoin financing business to provide leverage to bitcoin holders. Additionally, the U.S. Securities and Exchange Commission’s rescission of Staff Accounting Bulletin (SAB) 121 eased restrictions on publicly traded companies, paving the way for increased crypto custody and lending participation by banks and institutions. The introduction of U.S.-listed bitcoin ETFs has further opened opportunities, with prime brokers already expanding lending and leverage offerings on these products.
Powell adds, “[Cantor’s launch] will set an interesting trend, as bitcoin is a highly liquid asset trading globally 24/7. Its liquidity and transparency, combined with yields comparable to investment-grade bonds, make it attractive to large institutions. We, among others, are exploring how to package and tokenize bitcoin for institutional consumption.”
Recently, Maple Finance introduced a new product in collaboration with Core, the creator of a yield-bearing bitcoin token, enabling institutions to earn yield on their bitcoin holdings. Powell reports, “We’ve already seen $50 million in inflows within two months. I’m curious if this could act as a Trojan horse for more institutional on-chain participation.”
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