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FollowingQ2 Crypto mortgages fell 17%, CeFi surpassed DeFi for the first time since 2023.
According to Galaxy Research, the crypto mortgage market shrank to US$56.16 billion in the second quarter, down 16.78% from the previous quarter. This marks a continuation of the deleveraging trend, with current figures down 40.13% from the peak of US$78.69 billion set in the third quarter of 2025.
The divergence trend between DeFi and CeFi
Decentralized finance (DeFi) loans contracted even more, down 27.61% month-on-month to US$20.43 billion. In contrast, centralized finance (CeFi) loans fell only modestly by 9.62% to US$22.98 billion. The change pushed CeFi loans to overtake DeFi for the first time since the third quarter of 2023, marking a significant shift in market preferences.
Thereport points out that compared with previous recessions, the current deleveraging process is relatively orderly. Recent quarterly declines of 10%, 5% and 17% are seen as moderate, especially compared with the sharp decline in 2022 that plunged more than 55% in a single quarter.
Market background and impact
Data suggests that borrowers and lenders are becoming more cautious, possibly due to macroeconomic uncertainty and stricter risk management practices. The return to dominance of CeFi loans may indicate that even as DeFi continues to innovate, institutional participants still prefer platforms with clear regulatory frameworks and custody guarantees.
Why is it important
For market participants, falling lending volumes mean less leverage in the crypto ecosystem, which may reduce systemic risk but also inhibit liquidity. The shift to CeFi could affect the flow of new capital and how the agreement is adjusted. For observers, orderly deleveraging is a positive sign of market maturity, but the continued decline deserves attention to potential demand drivers.
Conclusion
Galaxy Research's second-quarter data highlights a market that is being recalibrated, with lending activity cooling from its peak in 2025. The relative stability of CeFi compared to DeFi suggests that markets are cautious but not panicked, while the orderly nature of the decline provides some comfort. As the third quarter unfolds, stakeholders will be watching whether this trend stabilizes or accelerates.
FAQs
Q1: What is a cryptocurrency mortgage?
Cryptocurrency mortgages refer to borrowing legal currency or stablecoins by pledging cryptocurrency as collateral. Such loans can occur on a centralized platform (CeFi) or through a decentralized protocol (DeFi).
Q2: Why did DeFi loans fall more than CeFi?
The report did not specify a single reason, but possible factors include: higher risk perceptions of unregulated agreements, smart contract vulnerabilities, and a shift to platforms with stronger compliance measures.
Q3: How does this compare to previous market downturns?
De-leveraging is currently considered orderly, with quarterly declines of 10%, 5% and 17% respectively-well below the plunge of more than 55% in a single quarter in 2022, indicating that the market is more mature and resilient.
