Decentralized finance (DeFi) surpassed centralized finance (CeFi) in its recovery from the previous industry crisis, demonstrating a notable shift in the crypto lending environment as well as a significant shift in investor trust and market dynamics. According to new data, DeFi borrowing has increased nearly tenfold, while CeFi continues to struggle following years of market instability.

DeFi’s Resurgence Highlights Structural Strength

The crypto lending market dropped by 43% to $36.5 billion in 2024 from $64.4 billion in 2021 with major CeFi platforms such as Genesis, Celsius, BlockFi, and Voyager collapsing, eroding customer trust. CeFi’s market share collapsed, open borrows declining by 82%, while DeFi continued to build quietly. According to Galaxy Digital report:

“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.”

As per the report, DeFi lending has made a big bounce back, increasing from $1.8 billion in late 2022 to $19.1 billion at the end of 2024, which is an incredible 959% rise in just two years.  The resilience of DeFi’s open, non-custodial products, which carried operating without hiccups despite market turbulence, contributed to this robust rebound. However, centralized finance (CeFi) platforms failed because to poor risk management and a lack of transparency, which caused the majority of them to fail.

CeFi Struggles to Rebuild Trust and Volume

As DeFi lending expands, centralized finance (CeFi) is finding it difficult to bounce back.  Outstanding CeFi loans have declined to $11.2 billion, a sharp decline from $34.8 billion in 2022.  Tether, Galaxy, and Ledn are the last three major players in the CeFi market, holding 88.6% of the centralized lending market.  But their combined market share is just 27% of the overall crypto lending market.

According to experts, DeFi’s resurgence is more than simply a temporary bounce; it represents a deeper, more fundamental shift in the crypto world. The failure of centralized enterprises during the market crisis demonstrated the significance of basic DeFi principles such as transparency, automation, and decentralization. These characteristics have proven to be more than simply ideals; they are what kept DeFi afloat while others failed.

As reported by PANews, Galaxy Digital’s Alex Thorn predicted on April 15 that CeFi loans would fall 68% to $11.2 billion at the end of 2024, from $34.8 billion in 2022. The three large CeFi lenders were Tether, Galaxy, and Ledn.  Although DeFi is transparent and CeFi is dark, together they represent an outstanding loan market of around $30 billion. DeFi now exceeds CeFi in the volume of loans, and including CDP stablecoins such as DAI brings the total up to $35 billion, where over 60% of the crypto lending industry belongs to DeFi.

Market Outlook: A New Lending Paradigm

The shift towards decentralized finance (DeFi) from centralized finance (CeFi) is more a change in investor sentiment, rather than in numbers.  Competitive yields without high risks, offered by the likes of Aave, Compound, and MakerDAO, have drawn institutional as well as retail borrowers to DeFi.  With regulatory burdens on centralized institutions mounting, it is suggested that DeFi lending may soon capture crypto credit issuance.

This transformation is more than a rebound; it is a paradigm shift in how lending occurs in the world of digital assets.  As CeFi stumbles and DeFi expands, the future of cryptocurrency lending is unequivocally decentralized.