Crypto lending reach new all-time high with DeFi activity ahead of CeFi growth

On-chain crypto collateralized loans grew 42% in the second quarter of 2025 to hit a new all-time high of $26.5 billion. Crypto investment firm Galaxy disclosed this in its latest report on the crypto lending sector.

According to the report by Galaxy Research associate Zach Pokorny, the 42% increase means the dollar value of open loans on decentralized finance applications increased by $7.84 billion.

However, loans on centralized finance crypto platforms also increased, although at a lower rate. As of June 30, the value of outstanding CeFi loans reached $17.78 billion, representing a 14.66% growth quarter over quarter.

While this shows how DeFi continues to outpace CeFi regarding crypto loans, the centralized platforms have grown substantially in the past few years. Galaxy Research noted CeFi loans have grown by 147.5%, around $10.59 billion, since Q4 2023.

Interestingly, the surge in crypto loan value during Q2 marks a resurgence after declining in Q1. This captures the renewed optimism in the crypto sector, which picked up around April.

Thus, it was not just that more users were lending crypto assets. The value of cryptocurrencies also increased significantly during the period, contributing to the general rise in dollar value of crypto loans.

Tether leads centralized lending

Meanwhile, Tether is the clear leader for centralized lending activity as the stablecoin issuer, having a 57.02% market share with $10.14 billion in open loans as of June 30. It is followed by Nexo, which has an 11.01% share of $1.96 billion, while Galaxy is in the top three at $1.11 billion. The three firms account for 74.26% of all open loans from CeFi lenders.

Still, the subsector shows a lot of diversity with CeFi lenders offering different kinds of loans across the board. While some offer only Bitcoin-collateralized loans, others allow altcoin collateral, and cash loans do not include stablecoins.

For instance, Ledn, which was one of the top three issuers in Q1, has now fallen out of the top three due to its decision to focus exclusively on Bitcoin-backed lending as opposed to allowing Ethereum and other yield products before now.

The variety of lenders and loans available in CeFi has allowed for increased competition in the sector, which, according to the Galaxy report, is starting to reflect in the cost of borrowing. The report observed that costs are improving, which, along with increasing crypto prices, further drives borrowing activity.

Interestingly, another major driver of the increase in CeFi lending has been treasury companies, which now use centralized lenders to finance their crypto accumulation. However, Ethereum treasury companies have not really tapped into the lending market to finance their accumulation, with most of them relying on other means so far.

Ethereum is driving DeFi lending activity

Meanwhile, the Ethereum network is the major driving force behind DeFi lending. This is mostly due to Ethena and Aave Liquid Leverage program and increasing adoption of Pendle principal tokens on Euler Finance and Aave. The report noted that DeFi users are relying heavily on looping strategies through these options.

It said:

“Under the Liquid Leverage program and Pendle PT tokens, users enact “looping strategies” that allow them to arbitrage the yield of their collateral assets against the cost of borrowing assets against them.”

Meanwhile, the value of deposits for DeFi lending continues to increase with a 33.91%  growth since June 30 to now reach $79.22 billion by July 31. Ethereum alone accounts for 78.22% of all DeFi lending deposits as of that date, while Solana has only a 5.3% share.

Interestingly, Ethereum also leads in borrows. In the month between June 30 and July 31, assets borrowed on DeFi lending applications increased by 33.94%, translating to $6.2 billion in additional borrows. Ethereum saw a 42.73% growth while layer-2 networks saw the second fastest growth at 24.71%.

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