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,…