tl;dr
Active loans in decentralized finance (DeFi) lending platforms reached a record $23.723 billion as of May 21, surpassing the previous peak from December 2021 by about $3 billion. This growth, driven by platforms like Aave, Morpho, and Compound, reflects increased demand for leverage among traders us...
Active loans across decentralized finance (DeFi) lending platforms soared to a record $23.723 billion as of May 21, surpassing the previous peak from December 2021 by approximately $3 billion. This surge, driven by platforms such as Aave, Morpho, and Compound, signals a heightened demand for leverage among traders engaged in permissionless credit for trading, staking, and yield strategies.
Meanwhile, the total value locked (TVL) within the DeFi ecosystem reached $180.4 billion as of May 22. This figure stands 6.4% below the $192.8 billion recorded on January 31, just prior to the announcement of new import tariffs. The period between early February and April saw a nearly 36% decline in TVL coupled with a 27% drop in Bitcoin prices, reflecting broader market pressures.
Despite the jump in loan volumes, overall collateral—comprising mainly Ethereum, staked ETH derivatives, and stablecoins—has decreased, bottoming near $110 billion in mid-March. This trend points to increased borrowing alongside ongoing collateral withdrawals, illustrating a scenario where on-chain leverage intensifies even as aggregate collateral diminishes.
Lending yields on stablecoins have remained attractive, with supplied-USDC rates on Aave and Morpho-Aave hovering between 6% and 8% annualized since April. These high yields entice stablecoin deposits into lending pools, fueling loan growth while mitigating significant increases in TVL, given that stablecoins typically enter protocols at a one-to-one dollar ratio.
Overall, the record $23.7 billion active loans paired with a TVL that remains slightly below pre-tariff levels underscores a DeFi market characterized by accelerating credit demand amidst relatively stable collateral, showcasing the sophisticated interplay of leverage, yield-seeking, and market dynamics.