DeFi Lending Skyrockets in Q3, Crushing CeFi: Galaxy Reports

Amidst incentives, stronger collateral, and rising costs, DeFi lending surged in Q3, capturing a file 55.7% market share in the course of the quarter.

DeFi lending reached a brand new file in the third quarter, in accordance with a brand new report from Galaxy Digital’s analysis staff, which discovered that the dollar-denominated worth of excellent loans on decentralized finance (DeFi) purposes rose by $14.52 billion, or 54.84%, to $40.99 billion on the finish of Q3.

When mixed with centralized finance (CeFi) lenders, complete excellent crypto-collateralized loans rose to $65.37 billion in Q3, up $21.12 billion from the earlier quarter. This is a brand new all-time excessive after surpassing the sooner peak of $53.44 billion from This fall 2021 by $11.93 billion.

DeFi Lending Explodes to Record Highs

Galaxy Research, in its newest report, attributed the continued growth of DeFi lending to a number of components. This consists of the expansion of “points farming” and airdrop incentive applications, which encourage customers to maintain loans open even beneath market stress. Increasing use of improved collateral property akin to Pendle PTs, which permit customers to loop stablecoin methods at favorable loan-to-value ratios, can be one other issue, in addition to rising crypto asset costs, which enhance borrowing capability as collateral values respect.

The report, nonetheless, warned that there’s potential for double-counting in the mixed CeFi and DeFi lending totals, as some CeFi entities borrow by means of DeFi protocols earlier than lending these property to off-chain shoppers, which makes it tough to separate on-chain and off-chain exposures.

With the rise in DeFi exercise, this sector’s lending dominance over CeFi venues climbed to a brand new all-time excessive of 62.71% on the finish of Q3 2025, up from 59.83% in Q2 2025 and better than the earlier peak of 61.99% in This fall 2024.

Meanwhile, the crypto-collateralized portion of collateral debt place (CDP) stablecoin provide fell by $658 million, or 7.4%, quarter-over-quarter, although the report once more famous attainable double-counting involving CeFi entities that mint CDP stablecoins to fund loans to off-chain debtors.

Overall, complete crypto-collateralized lending expanded by $20.46 billion in Q3, reaching a brand new all-time excessive of $73.59 billion. By quarter’s finish, DeFi lending purposes accounted for 55.7% of the market, up 588 foundation factors from Q2 2025. During the identical interval, CeFi venues held 33.12%, down 36 foundation factors, whereas CDP-backed stablecoin provide represented 11.18%, down 547 foundation factors.

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Combined, DeFi lending apps and CDP stablecoins gave on-chain lending venues a 66.88% market share, barely above the prior all-time excessive of 66.86% set in This fall 2024. The report additionally highlighted that DeFi lending remained resilient regardless of unstable market circumstances, as excellent borrows hit a each day file of $43.82 billion on October 7 earlier than easing by solely 11.55% to $38.76 billion by October 31.

Key Industry Moves

In This fall, nonetheless, main gamers invested in strengthening the lending ecosystem. For occasion, in October, Ripple partnered with Immunefi to spice up the safety of the proposed XRPL Lending Protocol and launched a world “Attackathon” that invited elite Web3 safety researchers to stress-test the system forward of an upcoming validator vote.

By November, ecosystem growth continued as main stablecoin issuer Tether made a strategic funding in Ledn, a Bitcoin-backed lending platform, in a bid to strengthen self-custody, monetary resilience, and broader institutional adoption.