The landscape of crypto lending is experiencing renewed vitality. Both traditional centralized finance (CeFi) and decentralized finance (DeFi) platforms are on the rise, with DeFi leading the resurgence.

Following a significant downturn that saw industry giants such as Celsius, Genesis, and BlockFi falter, investor confidence took a hit, causing a loss of trust in the sector.

In the battle of CeFi versus DeFi in the crypto lending sphere, recent data from Galaxy Digital reveals that outstanding CeFi loans totaled $11.2 billion in Q4 2024, marking a 73% increase from the lows of the bear market at $6.4 billion.

While the recovery in CeFi lending is a positive sign, it still lags significantly behind its previous peak due to the aftermath of the 2022 bear market and the collapse of major players in the lending space, leading to a decline in loan activity and overall market size.

The resurgence in CeFi lending is dominated by a few key players, namely Tether, Galaxy, and Ledn, who now hold an 89% market share as of Q4 2024, compared to the top three lenders in 2022, which included Genesis, BlockFi, and Celsius, holding 75% market share.

DeFi lending, on the other hand, has seen a much more robust recovery, with its market share increasing from 34% in 2020-2021 to 63% in Q4 2024. The growth of DeFi lending apps like Aave and Compound has been impressive, with open borrows reaching $19.1 billion across 20 lending applications and 12 blockchains by the end of Q4 2024.

Driven by the success of DeFi lending apps, the overall crypto lending market has seen a significant rebound, growing by 214% from Q4 2022 to Q4 2024, with DeFi platforms playing a major role in this expansion.

Despite facing regulatory challenges and competition, DeFi platforms have emerged as leaders in the crypto lending market recovery, leveraging their decentralized and permissionless nature to drive growth and resilience in an industry that continues to navigate through turbulence.