18th August 2026 – (New York) The crypto‑backed lending market contracted to $56.16 billion in the second quarter, a decline of 16.78 per cent from the previous quarter, according to Galaxy Research. The figure is now 40.13 per cent below the $78.69 billion peak recorded in the third quarter of 2025, underscoring a continued phase of deleveraging across digital‑asset credit.
Decentralised finance lending saw the sharper pullback, sliding 27.61 per cent quarter on quarter to $20.43 billion. Centralised finance lending fell by a comparatively modest 9.62 per cent to $22.98 billion. This swing pushed CeFi ahead of DeFi for the first time since the third quarter of 2023, pointing to a shift in market preference.
The report notes that the current retrenchment has been relatively orderly when set against past downturns. Recent quarterly drops of around 10, 5 and 17 per cent are described as moderate, especially compared with the single‑quarter slump of more than 55 per cent seen in 2022.
Cautious positioning by borrowers and lenders appears to be shaping conditions, amid macroeconomic uncertainty and tighter risk controls. CeFi’s regained lead may reflect institutions favouring platforms with clearer regulatory guardrails and custodial assurances, even as DeFi continues to innovate.
For market participants, shrinking lending volumes indicate reduced leverage within the crypto ecosystem, potentially lowering systemic risk but also tempering liquidity. The pivot towards CeFi could channel new capital to centralised platforms and influence how protocols evolve.