Cryptocurrency-backed loans reached a record high of $73.59 billion at the end of the third quarter of 2025, according to Galaxy Research.
This figure exceeds the previous high of $69.37 billion in Q4 2021 by 6.09%, with on-chain lending now holding 66.9% market share, up from 48.6% four years ago.
The market grew by $20.46 billion in the third quarter, representing 38.5% quarter-over-quarter growth, according to the report.
The move toward on-chain lending represents a structural shift from the 2021 cycle, which relied on unsecured credit and opaque lending practices.
DeFi loan applications reached $40.99 billion in the third quarter, a quarter-over-quarter increase of $14.52 billion.
Bitcoin served as the primary collateral asset across all protocols. The growth rate of 54.84% gave DeFi applications a 55.7% share of the total lending market.
In on-chain borrowing, loan applications now account for over 80% of activity, with CDP stablecoins (assets like DAI that are issued by locking crypto as collateral) holding just 16%, according to the Galaxy report.
Galaxy identified three main factors driving the expansion of DeFi lending. Point farming and airdrop programs incentivize users to maintain their borrowings despite market volatility.
Enhanced collateral assets such as Pendle Principal Tokens enable effective closure strategies. Cryptocurrency price appreciation in the third quarter allowed users to borrow more against existing collateral.
Lending app Aave DeFi has captured significant market share on a network identified in the report as the Plasma blockchain.
Galaxy data indicates that the channel attracted more than $3 billion in outstanding borrowings within five weeks of its launch. Aave holds 68.8% of the on-chain lending market, making it Aave’s second largest deployment after the Ethereum mainnet, according to the report.
Centralized financial loans reached $24.37 billion as of September 30, a growth of 37.11% compared to the previous quarter.
CeFi lenders only moved to fully collateralized lending after the credit implosions of 2022. Stablecoin issuer Tether maintained $14.6 billion in collateralized lending, according to its third-quarter transparency report.
Tether holds a 59.91% share of the CeFi lending market tracked by Galaxy Research, up 2.89 percentage points from the second quarter.
The top three lenders (Tether, Nexo with $2.04 billion, and Galaxy with $1.8 billion) control 75.66% of CeFi loans tracked.
Galaxy noted that surviving CeFi lenders have turned to full underwriting and public reporting as they seek funding from institutional investors.
Shortly after the end of the third quarter, the futures market experienced its largest liquidation event on October 10, 2025. Over $19 billion in perpetual futures positions were liquidated on the exchanges.
