The cryptocurrency lending sector has reached unprecedented levels of transparency, primarily driven by companies like Tether, Nexo, and Galaxy, with an outstanding loan portfolio nearing $25 billion for the third quarter.
Since the start of 2024, the crypto lending market has seen over a 200% growth, according to Galaxy Research. This marks the highest level achieved since its peak in Q1 2022.
Nonetheless, it has not yet reached its previous peak of $37 billion.
According to Alex Thorn, head of research at Galaxy, the key difference between now and then lies in the emergence of new centralized finance lending platforms and enhanced transparency.
Thorn expressed pride in the transparency of its contributors, noting that this represents a significant shift from earlier market cycles.
Tether and Emerging Players Lead in CeFi Lending
Previously, the CeFi lending market was largely controlled by a select few platforms during the peak of the last market cycle.
Notable participants included Genesis, BlockFi, Celsius, and Voyager, all of which suffered significant repercussions from their ties to the collapsed FTX exchange in November 2022.
Celsius had already declared bankruptcy in July 2022, prior to FTX’s downfall, mainly due to its exposure to Three Arrows Capital.
Related: Stablecoin leader Tether invests in Ledn, eyes global crypto lending market
Thorn believes that the departure of many platforms linked to FTX has allowed more transparent and sound practices to emerge.
As of September 30, Tether holds $14.6 billion in open loans, accounting for a 60% market share, while Nexo and Galaxy follow with $2 billion and $1.8 billion, respectively, as reported by Galaxy.
Tether regularly publishes quarterly attestations, while Galaxy and Coinbase present their data through public financial reports. Nexo also provides data to Galaxy Research proactively, according to Thorn.
Since the collapses of 2022, CeFi lenders have adopted much more cautious practices.
The practice of uncollateralized lending has nearly vanished as surviving firms have implemented stricter risk management, full collateralization, and improved transparency to attract public listings and institutional investment.
DeFi Lending Reaches Record Levels
On the other hand, the dollar value of loans on decentralized finance platforms achieved another record high at the end of Q3, soaring by 54.8% to $41 billion, as reported by Galaxy last month.
When combining the value from DeFi apps with CeFi lending platforms, the total outstanding crypto-collateralized borrows reached an all-time high of $65.4 billion at quarter-end, it noted.
Magazine: Animoca’s investment in altcoin potential, analyst predicts $100K Bitcoin: Hodler’s Digest
