Crypto-Backed Lending Market Contracts by 16.78% in Q2
The crypto-backed lending market saw significant contraction in Q2, decreasing to $56.16 billion from $67.35 billion in Q1, a decline of 16.78%. This represents a new low for the market, with figures now down 40.13% from the peak recorded in Q3 2025.
The downturn was particularly severe for decentralized finance (DeFi) lending, which fell by 27.61% quarter on quarter to $20.43 billion. In contrast, centralised finance (CeFi) lending dropped by a more modest 9.62% to $22.98 billion, marking the first time CeFi has overtaken DeFi since Q3 2023.
The shift towards CeFi is attributed to institutions favouring platforms with clearer regulatory guardrails and custodial assurances amid macroeconomic uncertainty and tighter risk controls. This pivot could channel new capital to centralised platforms and influence how protocols evolve, potentially lowering systemic risk but also tempering liquidity.