Crypto-collateralized lending shrank again in Q2 2026, with total outstanding borrows falling $11.33 billion to $56.16 billion, according to Galaxy Research. That's a 16.78% drop from the prior quarter and the third consecutive quarterly decline, leaving the market about 40% below its Q3 2025 peak of $78.69 billion.
A slow bleed, not a crash
Galaxy frames the slide as a gradual unwinding rather than a panic. The quarterly drops have been 10%, 5%, and then 17% — compared to the 2022 collapse, which saw a 55% plunge in a single quarter followed by 9% and 29% declines. This time, there's no wave of forced liquidations or counterparty failures, just persistent risk reduction. As Galaxy put it, the market is 'taking the stairs down, not the elevator.'
Where the money pulled back
The decline was broad. DeFi lending outstanding borrows fell hardest, down 27.61% to $20.43 billion. CeFi open borrows contracted 9.62% to $22.98 billion, with Tether's market share slipping 371 basis points to 58.54% as the main drag. The crypto-collateralized portion of CDP stablecoin supply also dropped 7.86%.
Notably, this is the first quarter since Q4 2022 where all three legs — CeFi, DeFi, and CDP stablecoins — declined at the same time.
Who bucked the trend
Not everyone shrank. Galaxy, Coinbase, Ledn, Arch, Sygnum, and Milo all grew their lending books during the quarter. Meanwhile, Strategy completed a $1.5 billion debt repurchase in May, cutting its digital asset treasury debt to $16.1 billion — a move that reduced the supply of crypto-backed borrowing from one of the sector's biggest players.
Signs of life after the quarter
Early data suggests the bleeding may have stopped. DeFi borrows stood at $21.94 billion on July 21, up from $20.43 billion at the end of Q2. Futures open interest also recovered to roughly $114 billion by the end of July, from $103.2 billion during the quarter.
Whether that rebound holds through Q3 will depend on whether borrowers are willing to step back in — and whether the gradual descent has finally hit the bottom.
