DeFi Lending Skyrocket in Q3, Crushing CeFi: Galaxy Reports

Amidst incentives, stronger collateral, and rising prices, DeFi lending surged in Q3, capturing a record 55.7% market share during the quarter.

DeFi lending reached a new record in the third quarter, according to a new report from Galaxy Digital’s research team, which found that the dollar-denominated value of outstanding loans on decentralized finance (DeFi) applications rose by $14.52 billion, or 54.84%, to $40.99 billion at the end of Q3.

When combined with centralized finance (CeFi) lenders, total outstanding crypto-collateralized loans rose to $65.37 billion in Q3, up $21.12 billion from the previous quarter. This is a new all-time high after surpassing the earlier peak of $53.44 billion from Q4 2021 by $11.93 billion.

DeFi Lending Explodes to Record Highs

Galaxy Research, in its latest report, attributed the continued expansion of DeFi lending to several factors. This includes the growth of “points farming” and airdrop incentive programs, which encourage users to keep loans open even under market stress. Increasing use of improved collateral assets such as Pendle PTs, which allow users to loop stablecoin strategies at favorable loan-to-value ratios, is also another factor, in addition to rising crypto asset prices, which increase borrowing capacity as collateral values appreciate.

The report, however, warned that there is potential for double-counting in the combined CeFi and DeFi lending totals, as some CeFi entities borrow through DeFi protocols before lending those assets to off-chain clients, which makes it difficult to separate on-chain and off-chain exposures.

With the increase in DeFi activity, this sector’s lending dominance over CeFi venues climbed to a new all-time high of 62.71% at the end of Q3 2025, up from 59.83% in Q2 2025 and higher than the previous peak of 61.99% in Q4 2024.

Meanwhile, the crypto-collateralized portion of collateral debt position (CDP) stablecoin supply fell by $658 million, or 7.4%, quarter-over-quarter, though the report again noted possible double-counting involving CeFi entities that mint CDP stablecoins to fund loans to off-chain borrowers.

Overall, total crypto-collateralized lending expanded by $20.46 billion in Q3, reaching a new all-time high of $73.59 billion. By quarter’s end, DeFi lending applications accounted for 55.7% of the market, up 588 basis points from Q2 2025. During the same period, CeFi venues held 33.12%, down 36 basis points, while CDP-backed stablecoin supply represented 11.18%, down 547 basis points.

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Combined, DeFi lending apps and CDP stablecoins gave on-chain lending venues a 66.88% market share, slightly above the prior all-time high of 66.86% set in Q4 2024. The report also highlighted that DeFi lending remained resilient despite volatile market conditions, as outstanding borrows hit a daily record of $43.82 billion on October 7 before easing by only 11.55% to $38.76 billion by October 31.

Key Industry Moves

In Q4, however, major players invested in strengthening the lending ecosystem. For instance, in October, Ripple partnered with Immunefi to boost the security of the proposed XRPL Lending Protocol and launched a global “Attackathon” that invited elite Web3 security researchers to stress-test the system ahead of an upcoming validator vote.

By November, ecosystem expansion continued as leading stablecoin issuer Tether made a strategic investment in Ledn, a Bitcoin-backed lending platform, in a bid to strengthen self-custody, financial resilience, and broader institutional adoption.