Market Recovery and Growth
Centralized finance lending markets experienced a significant surge, hitting $25 billion in outstanding loans during the third quarter. This marks the highest level recorded in over three years, with platforms emphasizing transparency spearheading the sector's recovery.
The cryptocurrency lending market has demonstrated substantial expansion, growing more than 200% since the beginning of 2024. The third quarter figure represents the highest total since the first quarter of 2022, although it still remains below the previous peak of $37 billion.
Increased Transparency in Lending
Alex Thorn, head of research at Galaxy, highlighted on Sunday that the current lending landscape exhibits considerably more transparency when compared to prior market cycles. Thorn expressed pride in the data contributions from lending platforms that are now regularly providing disclosures.
Stablecoin issuer Tether currently leads the centralized finance (CeFi) lending space, holding $14.6 billion in open loans as of September 30, which accounts for a 60% market share. Nexo and Galaxy secured the second and third positions, respectively, with $2 billion and $1.8 billion in loans, according to Galaxy's report.
Lessons from Past Market Collapses
The previous market cycle peak was dominated by prominent players such as Genesis, BlockFi, Celsius, and Voyager. All four of these platforms experienced significant repercussions due to their exposure to FTX, which ultimately collapsed in November 2022. Celsius, in particular, filed for bankruptcy in July 2022, largely as a result of its exposure to Three Arrows Capital.
Thorn argues that the void left by the exit of FTX-linked platforms has been filled by operators employing healthier business practices. Tether consistently publishes quarterly attestations, while Galaxy and Coinbase provide data through public financial reports. Nexo proactively shares information with Galaxy Research.
Shift Towards Conservative Lending
Following the market collapses of 2022, CeFi lenders have adopted more conservative strategies. Uncollateralized lending has become largely obsolete, as surviving firms have implemented stricter risk controls, full collateralization standards, and enhanced transparency to attract institutional capital.
Decentralized Finance and Overall Market Growth
Decentralized finance (DeFi) applications also reached a new quarter-end record in the third quarter, with $41 billion in outstanding loans, reflecting a growth of 54.8%. When combined with CeFi lending venues, the total amount of crypto-collateralized borrows reached $65.4 billion at the end of the quarter, establishing a new all-time high for the overall market.
The current trend toward increased transparency and conservative lending practices signifies a notable departure from the dynamics of the previous market cycle. Industry observers point out that the present market structure prioritizes disclosure and robust risk management over the aggressive growth strategies that characterized earlier periods.