Decentralized Finance Returns to the Crypto Market

The crypto lending market has seen a major shift since its 2021 crash, with more cautious regulations replacing the unsecured loans that previously supported prices.

With major centralized lenders like Genesis out of the picture, decentralized finance (DeFi) has taken the lead, buoyed by the surge in total value locked (TVL) in protocols like Aave v3 and Spark v1.

Aave v3 grew from $16.5 billion to $27 billion in a month, benefiting from capital efficiency and blockchain-based backing, while Spark v1 nearly doubled from $4.5 billion to $8 billion.

This trend reflects the strength of DeFi, which also benefited from the GMCI DeFi Index’s more than 100% surge in November.

In contrast, the centralized finance (CeFi) market has contracted sharply since Genesis’ departure, with collateralized loans replacing risky loans, providing long-term market stability.

This shift represents a turning point towards a more transparent and sustainable financial system, as DeFi continues to fill the void left by CeFi with a balance of caution and innovation.