Decentralized finance (DeFi) lending is gaining traction, boasting a total value locked (TVL) of $53.6 billion, which represents 43% of the $124.6 billion locked in all DeFi protocols. In stark contrast, the TVL of decentralized exchanges (DEXs) has significantly dropped from $85.3 billion in November 2021 to $21.5 billion today. Henrik Andersson from Apollo Capital attributes the growth in DeFi lending to its sustainability, while noting that DEX liquidity pooling has become less profitable. With Uniswap v3's more capital-efficient design, liquidity providers can earn more with less upfront investment, further impacting DEX TVL. The rise of a crosschain trading mechanism may also have diverted liquidity from DEXs to centralized exchanges. By the end of 2024, DeFi lending had captured 65% of the total crypto lending market, aided by the collapse of several centralized lenders, which caused an estimated 78% decline in the lending market size from its 2022 peak. However, DeFi lending protocols have shown resilience, achieving a nearly 960% rise in open borrows from Q4 2022 to Q4 2024, highlighting their risk management and algorithmic borrowing practices. Future growth is expected with increased institutional participation and clearer regulations.

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