The entire number of outstanding loans in the cryptocurrency lending industry dropped to $36.5 billion in Q4 2024, a more than 40% decrease from its high in 2021.
According to a report by Galaxy Research, the failure of key lending platforms like Celsius, BlockFi, and Voyager, regulatory pressure, and a decline in investor trust have all contributed to the recent setbacks for crypto lending, which was once a thriving industry during the bull run.
Investor Sentiment Shift Hurts Appetite in Crypto Lending
A wider change in mood throughout the digital asset industry, with both lenders and borrowers growing more apprehensive, is indicated by this abrupt decline.
The industry has also cooled as a result of increased oversight from international regulators and the implementation of more stringent compliance standards. Additionally, the overall lending volume has continued to decline as DeFi alternatives gain popularity and centralized lenders lose favor.
As institutions and individual investors reevaluate the viability of yield-generating strategies in cryptocurrency, the market’s downturn also reflects a more risk-averse climate.
Since loan activity is no longer as appealing or trusted as it was at its peak in 2021, the sector must now work to restore confidence while adjusting to a new era of stricter regulation and changing consumer demands in the rapidly changing digital finance world.
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Crypto Open Loans Still See Rise Despite Market Volatility
By the end of Q4 2021, the market for open loans in cryptocurrency, excluding CDP stablecoins, reached a peak of $48.4 billion.
Its 80% decline to just $9.6 billion in Q4 2022, however, was a result of market downturns and well-publicized breakdowns.
The industry has exhibited indications of revival since that low point. The market recovered to $30.2 billion by the end of Q4 2024, a 214% gain from its 2022 low.
The emergence of decentralized finance (DeFi) lending services, which are becoming more popular as consumers turn away from centralized lenders and toward more open, on-chain options, has been a major factor in this increase.
Open Borrowings See a Comeback
Since reaching a low of $1.8 billion in open borrows at the end of Q4 2022, during the height of the cryptocurrency bear market, on-chain loan applications have had a stunning comeback.
Open borrowings on decentralized lending platforms reached $19.1 billion by Q4 2024, a remarkable 959% rise in just eight quarters.
As users and developers increasingly choose transparent, permissionless alternatives to centralized lenders, this increase shows a revived interest in decentralized finance (DeFi).
The activity, which involves 20 loan applications running on 12 distinct blockchains, demonstrates the DeFi ecosystem’s increasing interoperability and diversity.
Improved protocol security, better user experiences, and a change in market confidence toward non-custodial financial infrastructure in the wake of the CeFi collapse are the main drivers of the increase.
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