Lending in decentralized finance hit a new quarter-end high as the total active loans on DeFi applications neared $41 billion, Galaxy Digital<\/a> said in its latest \u201cState of Crypto\u201d report<\/a> for Q3. <\/p>\n Galaxy\u2019s research team wrote that DeFi borrowing grew by about $14.5 billion, or nearly 55% in the third quarter, alongside centralized crypto lending.<\/p>\n That growth helped push total crypto lending \u2014 across both DeFi and CeFi \u2014 to almost $73.6 billion, setting a new all-time high above the previous peak of $69.3 billion at the end of Q4 2021.<\/p>\n It\u2019s worth noting that DefiLlama data shows<\/a> that the total value locked in DeFi lending protocols was at around $90.9\u202fbillion as of early October.<\/p>\n Although TVL doesn\u2019t necessarily reflect the amount actually borrowed from the protocols, if that $90\u202fbillion indeed held in early Q4, it could suggest that on-chain lending \u2014 combined with CeFi \u2014 was significantly higher than Galaxy\u2019s Q3 snapshot.<\/p>\n A spokesperson for Galaxy Digital clarified that the wording about all-time high was meant \u201cas of the end of Q3 2025,\u201d which means that the historic maximum was likely reached in early Q4.<\/p>\n In the report, Galaxy Digital explained that several factors helped borrowing increase. Airdrops<\/a>, points programs, better collateral products, and rising prices boosted users\u2019 ability to borrow as the value of their collateral grew.<\/p>\n But Galaxy Digital also warned about possible double-counting between CeFi and DeFi numbers. As the report\u2019s author, Galaxy research associate Zack Pokorny, wrote, some CeFi lenders borrow on-chain and then lend off-chain, which can show up twice without clear disclosures<\/p>\n \u201cFor example, a hypothetical CeFi lender may pledge its idle BTC to borrow USDC onchain, then lend that USDC to a borrower offchain. In this scenario, the CeFi lender\u2019s onchain borrow will be present in the DeFi open borrows\u202fand\u202fin the lender\u2019s financial statements as an outstanding loan to its client,\u201d Pokorny wrote in the report.<\/p>\n Galaxy Digital also noted that while DeFi and on-chain CeFi lending numbers can be seen on the blockchain and are easy to access, getting CeFi data \u201cis tricky\u201d because of \u201cinconsistencies in how CeFi lenders account for their outstanding loans and how often they make the information public.\u201d<\/p>\n But still, combined, DeFi and CeFi loans totaled $65.3 billion at the end of Q3, up $21.1 billion from Q2, with most of the increase coming from DeFi. DeFi\u2019s share of the market also grew, rising to 62.7% from 59.8% in the previous quarter.<\/p>\n As The Defiant previously reported, in the weeks following the Oct. 10 market crash, which resulted in record daily liquidations for crypto, the DeFi sector as a whole has struggled. The market shock in early November from the Balancer<\/a> exploit, followed almost immediately by Stream Finance’s collapse<\/a>, further eroded trust in the sector. <\/a><\/p>\n![\"the-defiant\"](\"https:\/\/thedefiant.io\/_next\/image?url=https%3A%2F%2Fcdn.thedefiant.io%2Fpasted-1763669459552-png-8648676a-5c18-49c6-a603-c5e069a374b4.png&w=2048&q=100\"\/)
Challenges in Off-Chain Lending<\/h2>\n
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