Key Insights
Recent trends indicate that users are increasingly turning to centralized platforms to borrow against their digital asset collateral amidst ongoing corrections in cryptocurrency prices and the market. The total value locked (TVL) in decentralized finance (DeFi) has plummeted to $117.9 billion, highlighting a significant decline in activities related to lending, staking, and trading.
Crypto Market Correction and DeFi Borrowing Trends
Since early October 2025, the cryptocurrency market has witnessed a substantial downturn following Bitcoin’s record high of $69,044. This decrease has led to a sharp contraction in decentralized borrowing activities.
Onchain Analysis: Aave vs. Nexo
According to insights from the on-chain analytics firm CryptoQuant, there is a notable disparity between decentralized and centralized borrowing amid the recent downturn in the crypto market. Data reveals that borrowing on decentralized platforms like Aave has seen a dramatic decline. For instance, the weekly borrowing of stablecoins such as USDT and USDC on Aave reached a peak of $6.2 billion in early August 2025. However, by late November, this figure had dropped by 69% to $1.9 billion. This downturn is closely linked to declining crypto prices, which have dampened both demand for leverage and the appetite for risk among investors. During bullish market conditions, investors often increase borrowing to expand their positions, but this tendency shifts during market corrections.
Market Dynamics: Liquidation Fears and Deleveraging
As market corrections unfold, concerns over liquidations grow, as decreasing collateral values may lead to forced sales. Consequently, traders tend to reduce their leverage by repaying existing loans or refraining from taking on new debts. Despite the slowdown in new borrowing activity, Aave has maintained an impressive $16.3 billion in outstanding loans, indicating that its core lending operations remain robust.
Nexo’s Resilience Amid Market Challenges
In contrast to Aave, Nexo, a centralized lending platform, has experienced a resurgence in new borrowings, even amid the current market turmoil. Recent figures reveal that retail credit withdrawals dropped from $34 million in mid-July to $8.8 million by mid-November. However, as cryptocurrency prices continued to decline, withdrawals surged to $23 million, reflecting a 155% increase week-over-week. This trend suggests a shift in user behavior, with individuals opting to borrow against their crypto assets rather than liquidating during market downturns.
DeFi TVL and Market Sentiment
The total value locked in DeFi continues to present a pessimistic outlook, as reported by DeFiLlama. Currently, the DeFi TVL is around $117.9 billion, indicating a 1.9% decrease over the last 24 hours. TVL reflects the total USD value of assets secured in DeFi protocols for various activities, including lending, staking, and trading. A higher TVL typically signifies growth in key cryptocurrencies, while the recent drop aligns with a broader trend of declining crypto prices observed since late October. Notably, Bitcoin (BTC), the largest cryptocurrency by market capitalization, reached an all-time high of over $126,000 in early October 2025, only to experience a sharp decline of approximately 30% by November and December. As of now, BTC is trading around $87,000, contributing to a total crypto market cap of $2.96 trillion.
Predictions for Institutional DeFi Growth in 2026
In a recent post on X, Asheesh Birla, CEO of Evernorth—a firm specializing in XRP digital asset treasury—expressed optimism regarding the future of institutional adoption of DeFi by 2026. Birla stated that this year could mark the onset of a significant shift towards institutional DeFi. His forecast is grounded in the expectation of enhanced regulatory clarity and a growing demand from enterprises within the crypto market.
Birla envisions that corporations will leverage DeFi protocols alongside artificial intelligence (AI) to automate back-office processes, potentially streamlining global financial management and improving payment and liquidity efficiency in the coming year. He also anticipates an increase in local stablecoins and on-chain foreign exchange (FX) markets, suggesting that region-specific stablecoins could emerge to compete with the traditional $9.6 trillion FX market. Furthermore, Birla predicts that non-fungible tokens (NFTs) may evolve into access tokens, catering to sports teams, entertainment, and brands to enhance both online and offline user experiences. Overall, Birla’s central thesis is that the cryptocurrency market is evolving beyond mere speculation to address real-world challenges, with a hopeful outlook for 2026 as institutions take the lead in shaping the future of finance.
