A new report from Galaxy Digital shows that record borrowing reflects a mix of airdrops, new lending products and crypto price gains.
Lending in decentralized finance hit a new high late in the quarter as total active loans on DeFi applications approached $41 billion, Galaxy Digital said in its latest “State of Crypto” report for the third quarter.
The Galaxy research team wrote that DeFi borrowing increased by approximately $14.5 billion, or almost 55%, in the third quarter, alongside centralized crypto lending.
This growth helped bring total crypto lending – both in DeFi and CeFi – to nearly $73.6 billion, setting a new all-time high above the previous peak of $69.3 billion at the end of Q4 2021.
It is worth noting that data from DefiLlama shows that the total value locked in DeFi lending protocols was around $90.9 billion as of early October.
While TVL does not necessarily reflect the amount actually borrowed from the protocols, if that $90 billion was actually held at the start of Q4, it could suggest that on-chain lending – combined with CeFi – was significantly higher than Galaxy’s Q3 snapshot.
A Galaxy Digital spokesperson clarified that the wording for the all-time high meant “at the end of the third quarter of 2025,” meaning the all-time high was likely reached at the start of the fourth quarter.
In the report, Galaxy Digital explains that several factors contributed to the increase in borrowing. Airdrops, points programs, better collateral products, and rising prices have increased people’s ability to borrow as the value of their collateral increases.
The challenges of off-chain lending
But Galaxy Digital also warned of possible double counting between CeFi and DeFi numbers. As the report’s author, Zack Pokorny, research associate at Galaxy, wrote, some CeFi lenders borrow on-chain and then lend off-chain, which can appear twice without clear disclosure.
“For example, a hypothetical CeFi lender can pledge its dormant BTC to borrow USDC on-chain, and then lend that USDC to an off-chain borrower. In this scenario, the CeFi lender’s on-chain borrowing will be present in DeFi open borrowings and in the lender’s financial statements as an outstanding loan to its client,” Pokorny wrote in the report.
Galaxy Digital also noted that while on-chain DeFi and CeFi loan numbers can be seen on the blockchain and are easy to access, obtaining CeFi data “is tricky” due to “inconsistencies in how CeFi lenders report their outstanding loans and how often they make the information public.”
Nonetheless, together, DeFi and CeFi lending totaled $65.3 billion at the end of the third quarter, up $21.1 billion from the second quarter, with most of the increase coming from DeFi. DeFi’s market share also increased to 62.7% from 59.8% in the previous quarter.
As The Defiant previously reported, in the weeks following the October 10 stock market crash, which led to record daily liquidations for crypto, the DeFi sector as a whole has struggled. The market shock caused by the Balancer exploit in early November, followed almost immediately by the collapse of Stream Finance, further eroded confidence in the sector.
Total DeFi TVL is down more than 25% since October 10 to $125 billion, down from $170 billion.
