DeFi Lending Protocols Surpass DEX in Market Volume

The amount of funds in credit DeFi protocols has reached unprecedented levels during the current market cycle, while decentralized exchanges (DEX) have continued to lose ground.

The total TVL of these projects stands at $53.3 billion, accounting for 43% of the overall $124.6 billion in the entire sector. Aave leads with $24 billion, a figure that also surpasses the liquid staking segment here.

In comparison, the locked value in DEX has decreased from $85.3 billion in November 2021 to $21.5 billion at the time of writing.

Henrik Andersson, founder of Apollo Capital, attributes this trend to lending becoming the only sustainable source of income within DeFi. He explains that DEX liquidity pools are losing attractiveness due to impermanent losses and increasing competition.

The «capital-efficient» design of Uniswap v3 enables users to earn more with lower investments but consequently reduces the overall TVL, Andersson noted. He explained that intent swaps, which source liquidity from centralized exchanges (CEX), are drawing funds away from DEX.

Lending protocols like Aave offer Ethereum and stablecoin holders annual returns ranging from 1.86% to 3.17%. While DEX pools may yield higher profits, they are volatile and reliant on daily fluctuations.

By the end of 2024, DeFi lending market share has reached 65%, surpassing that of centralized platforms. This shift occurred following the bankruptcies of Celsius, BlockFi, and other CeFi players, which reduced the market by 78% from its peak in 2022.

According to data from Galaxy Digital, the volume of loans in the DeFi sector has surged by 960% since the end of 2022.

«Institutional players and regulatory clarity will drive the next phase of growth,» analysts at Galaxy forecast.

As a reminder, in Q1 2025, the TVL of DeFi protocols declined by 27%, the trading volume of NFTs fell by 24%, while social and AI applications experienced the most significant growth.