Lending and borrowing are use cases for cryptocurrencies that have found strong product-market fit both onchain and offchain, with the category as a whole topping $64 billion in market size at its peak. The lending market has also played an important role in building a financial ecosystem on top of digital assets, allowing users to obtain liquidity on their holdings to deploy across DeFi and trade across onchain and offchain venues.
This report explores the onchain and offchain cryptocurrency lending markets. It is divided into two sections: the first offers a history of the crypto lending market, the players in it, its historical size (onchain and offchain), and some of the pivotal moments in the sector. The second part of the report delves into how some lending products and other sources of leverage work in onchain and offchain settings, who uses them, and the risks of each. The report offers a comprehensive view of the crypto lending market, shedding light on one of the most widely used but opaque sectors of the crypto economy. Crucially, the report provides a rare insight into the size of the offchain lending market, a historically opaque part of the industry.
Key Takeaways:
- The overall size of the crypto lending market is still meaningfully below the highs made at the tail-end of the 2020-2021 crypto bullmarket. The total size of the crypto lending market as of Q4 2024 including crypto-backed collateral debt position (CDP) stablecoins is $36.5 billion, down 43% from the all-time high of $64.4 billion in Q4 2021. The decline can be attributed to the decimation of lenders on the supply side, and funds, individuals, and corporate entities on the demand side.
- The top 3 CeFi lenders as of Q4 2024 include Tether, Galaxy, and Ledn combining for a loan book size of $9.9 billion at the conclusion of Q4 2024. Together, they make up 88.6% of the CeFi lending market and 27% of the total crypto lending market including crypto-backed CDP stablecoins.
- Onchain lending applications have experienced strong growth since the bear market bottom of $1.8 billion in open borrows at the conclusion of Q4 2022. There were $19.1 billion of open borrows across 20 lending applications and 12 blockchains as of Q4 2024. This represents an increase of 959% in open DeFi borrows over eight quarters.
The evolution of cryptocurrency lending markets represents a significant milestone in the maturation of digital asset infrastructure. As demonstrated throughout this report, lending and borrowing capabilities have emerged as foundational pillars of both decentralized and centralized crypto finance, creating essential market mechanisms that parallel traditional financial systems while introducing novel technological innovations.
Looking ahead, the cryptocurrency lending market appears poised for a new phase of growth, characterized by improved risk management frameworks, greater institutional participation, and clearer regulatory guidelines. The convergence of traditional financial expertise with blockchain-based innovation suggests a future where crypto lending services become increasingly sophisticated and reliable, while maintaining the unique benefits of blockchain technology. As the sector continues to mature, it may well serve as a bridge between traditional finance and the emerging digital asset ecosystem, facilitating broader adoption of cryptocurrency-based financial services.
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