CeFi lending’s up 73% after the sector’s collapse: Galaxy
Both CeFi and DeFi lending have made a comeback, Galaxy noted
Galaxy and Frame Stock Footage/Shutterstock and Adobe modified by Blockworks
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So lending markets have yet to make a comeback this cycle — and it kinda makes sense.
But Galaxy may have some good news for us all: Lending could be ready for some green shoots of its own.
“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,” Galaxy’s Zack Pokorny wrote.
“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.”
A look at the players in the space, courtesy of Galaxy.
At the end of last year, Tether, Galaxy and Ledn led the CeFi lending pack. Combined, the three had a loan book of $9.9 billion.
Lending, at its peak, had a total loan book of $34 billion, per Galaxy’s data — and it dropped as low as $6.4 billion after the collapse of the sector. Yikes.
Depending on your vibe this morning: The segment is up 73% from the lows, if you want to look at it positively, or down 68% off the highs.
A look at the performance of lending over the years.
But let’s not just focus on the CeFi of it all, right?
DeFi lending has actually seen more of a comeback. There’s been a whopping 959% increase — with $19 billion in open borrows at the end of last year — in “open DeFi borrows on the observed chains and applications in the eight quarters since the bottom was set.”
Just in case you’re more of a visual person.
At the end of last year, the number of outstanding loans through onchain lending apps was roughly 18% higher than the peak — $16 billion — set at the height of the bull market last cycle.
The strength of the recovery “can be attributed to the permissionless nature of blockchain-based applications and the survival of lending applications through the bear market chaos that felled major CeFi lenders.”
I know what you’re thinking: This data is great, but what’s next for both CeFi and DeFi lending?
Well, the answer is pretty obvious for CeFi — it all boils down to TradFi adoption. That subsector of the larger lending market will bounce back as we see more institutional adoption. Easy peasy — or so it looks.
But funnily enough, DeFi’s in a similar boat. Pokorny noted that DeFi lending’s future is tied to more institutions being onboarded, and, of course, building on the lending apps.
“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,” he noted.
I know we’ve been talking so much about institutions coming in, but this is why.
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