Q3 DeFi Lending Surges Ahead of CeFi: Insights from the Latest Galaxy Digital Report

In a remarkable turn of events, decentralized finance (DeFi) lending witnessed an unprecedented boom during the third quarter of 2025, according to a detailed report by Galaxy Digital's research team. The report sheds light on significant developments in the DeFi ecosystem as it overtakes centralized finance (CeFi) lending, marking a pivotal moment in the cryptocurrency landscape.

DeFi Lending Reaches New Heights

By the end of Q3 2025, the dollar value of outstanding loans on DeFi applications surged by $14.52 billion, reflecting a staggering growth rate of 54.84%, with the total pool of DeFi loans climbing to $40.99 billion. This growth is not merely a statistic; it marks a clear indication that users are increasingly opting for decentralized platforms driven by the promise of greater autonomy and rewards.

Comprehensive Growth in Crypto-Collateralized Lending

When factoring in central finance (CeFi) lenders, the aggregated amount of crypto-collateralized loans soared to an all-time high of $65.37 billion, an increase of $21.12 billion since the previous quarter. It’s a noteworthy development that eclipses the earlier peak of $53.44 billion achieved in Q4 2021 by $11.93 billion.

Factors Driving DeFi’s Surge

The dramatic increase can be attributed to various factors:

• Points Farming and Airdrops: Incentive programs encouraging users to maintain their loans, even amid market volatility, have significantly contributed to enhancing DeFi lending.
• Advanced Collateral Assets: The growing use of sophisticated collateral assets, such as Pendle PTs, provides users the ability to implement stablecoin strategies at attractive loan-to-value ratios, thus increasing borrowing capacity.
• Appreciation of Crypto Assets: Rising crypto asset prices have further enhanced the value of collateral, driving the demand for loans.

Defining the Landscape: CeFi vs DeFi

Despite the impressive growth of DeFi, the report also introduces critical caveats regarding the potential for double counting in the combined lending figures. Many CeFi institutions borrow funds via DeFi protocols only to lend those assets to off-chain clients, complicating the analysis of on-chain versus off-chain exposure.

Lending Dominance of DeFi

The report indicates that DeFi lending has expanded its dominance over CeFi, increasing market share to a record 62.71% by Q3's end, compared to 59.83% in Q2 2025, which leads to a notable rise in user preference for decentralized platforms.

Current Market Shares in Lending

By the close of Q3, the market shares of different lending categories were