Crypto loans decline 16% in Q2 – Is the lending market resetting?

Crypto lending is undergoing a reset as borrowers are reducing their exposure against collapsing markets. According to a report by Galaxy Research, that trend was apparent in Q2 with all categories of lending down collectively for the first time since 2022.

Total crypto-collateralized loans fell 16.78%, shedding $11.33 billion to reach $56.16 billion. Notably, the current total represents a decline of 40.13% compared with its peak of $78.69 billion, indicating the interest in borrowing has decreased significantly.

DeFi shows this transition even more clearly. Outstanding loan amounts were at $21.94 billion in July after having dropped from $47.13 billion in April. Still, that trend differs greatly from 2025, when DeFi lending decreased by over 80%.

Therefore, borrowing continues to decline in phases, even amid market stress and the $200 million rsETH exploit. Therefore, the sector is deleveraging through reduced credit demand rather than widespread liquidation, leaving a smaller but more orderly lending market.

Stablecoin volume reveals lending activity

That lending contraction becomes more significant when looking at how stablecoins are actually moving through crypto markets.

With fewer outstanding loans, stablecoins have been used for an estimated $41.7 trillion in adjusted transfers on their respective exchanges for 2026, led by USD Coin [USDC].