The crypto-collateralized lending market stood at $56.16 billion at the end of Q2 2026, down 16.8% from the prior quarter and roughly 40% below the Q3 2025 record of $78.7 billion, according to Galaxy Research data. The decline reflects stepwise deleveraging rather than a sudden collapse, with borrowers reducing leverage over several quarters.
Market Size and Composition
Galaxy Research valued total crypto-backed loans at $56.16 billion at the end of Q2 2026, a decrease of $11.33 billion from $67.42 billion at the end of Q1. The market peaked at $78.7 billion in Q3 2025.
Centralized finance (CeFi) lenders held $22.98 billion in outstanding loans, while decentralized finance (DeFi) applications held $20.43 billion. The remaining approximately $12.75 billion comes largely from crypto-backed stablecoin debt structures, according to the research.
CeFi vs DeFi
For the first time since Q3 2023, centralized lenders had more outstanding loans than DeFi lending applications. CeFi loans fell 9.6% in Q2 2026, while DeFi loans dropped 27.6%.
In Q1 2026, DeFi had $28.22 billion in loans against $25.43 billion for CeFi. By the end of Q2, CeFi led with $22.98 billion to $20.43 billion.
Galaxy noted that today’s large centralized lenders generally emphasize overcollateralization, institutional clients, better custody, clear balance sheets, shorter loan terms and regulated structures—a departure from the pre-2022 model.
CeFi Lending: About $23 Billion Outstanding
CeFi loans outstanding were $22.98 billion at the end of Q2 2026, down from $25.43 billion in Q1. The Q1 figure was already about 30% below the sector’s Q1 2022 record of $36.58 billion.
The low point came in Q4 2023, when CeFi loans fell to about $6.8 billion after the failures of Celsius, BlockFi, Genesis and other lenders. By Q1 2026, the market was more than 270% above that low.
Galaxy’s own average loan book was about $1.44 billion in Q2 2026, up slightly from $1.43 billion in Q1, and new loan originations rose during the quarter. Coinbase, Ledn, Arch, Sygnum and Milo also reportedly grew their loan books while the overall market shrank.
DeFi Lending Fell More Sharply
Outstanding DeFi loans were $20.43 billion at the end of Q2 2026, down 27.6% from $28.22 billion at the end of Q1. The all-time high was about $47.13 billion in September 2025. By July 31, 2026, Galaxy estimated on-chain lending at $21.94 billion, or 53% below the peak.
The decline is smaller than the more than 80% drop in DeFi borrowing during the previous bear market.
TVL Is Not Outstanding Loans
DefiLlama tracks about $51.6 billion of total value locked (TVL) across roughly 515 lending protocols. Much of that is collateral or supplied funds that have not been borrowed.
For example, Aave V3 has about $17.0 billion of TVL but $11.8 billion in active loans. Morpho has about $11.1 billion of TVL and $5.6 billion in loans. Using total TVL as a measure of DeFi borrowing would overstate actual debt.
The share of TVL that is lent out ranges from 39% at Spark to 70% at Maple, according to DefiLlama data as of October 19, 2026.
Leading Lending Protocols
Aave V3 is the largest DeFi lender with about $17.0 billion in TVL and $11.8 billion in active loans. It operates on more than 20 networks, with Ethereum holding about 83% of its TVL. The protocol generated about $37 million in fees over the latest 30 days, with $4.75 million becoming protocol revenue.
Morpho has about $11.1 billion in TVL and $5.6 billion in active loans. It earned about $22.2 million in fees over the latest 30 days. Morpho functions as an infrastructure layer for specialized lending markets and curated vaults.
Spark has about $6.9 billion in TVL and $2.7 billion in active loans. Its products include SparkLend, Spark Liquidity Layer and Spark Savings. Ethereum holds close to 90% of its TVL. Spark earned about $19.4 million in fees over 30 days, with annualized fees near $190 million.
Maple focuses on institutional credit and professionally managed lending pools. It has about $2.7 billion in TVL and $1.89 billion in active loans, with 30-day fees of about $8.1 million.
Compound V3 has about $646 million in active loans and $1.4 billion in TVL. It helped popularize algorithmic interest rates and permissionless borrowing.
Interest Rates
The average stablecoin borrow rate is about 4.7%, while the average stablecoin supply rate is about 3.6%, according to DefiLlama. Most DeFi borrowing rates are variable and rise with utilization.
Emerging Trends
Lending vaults have drawn more than $10 billion, up from roughly $4 billion at the start of 2025, according to a Financial Times report in October 2026. Some vaults offered yields from about 3% to more than 20%, with higher yields generally indicating higher credit, liquidity or collateral risk.
Galaxy estimated that more than $17.5 billion of debt had been used by Q1 2026 to buy digital assets or support digital-asset treasury strategies, linking crypto lending to public companies holding Bitcoin and other tokens.
Risks Remain
Collateral prices can fall, smart contracts can fail and borrowers can be liquidated automatically. After the failures of 2022, the sector has rebuilt around overcollateralized loans, open liquidity data and more institutional borrowers. The market is smaller than its 2025 peak but better organized than the one that entered the last downturn, according to Galaxy Research.
