TL;DR
- After months of contraction, DeFi credit markets are showing early signs of stabilization as on-chain lending activity begins to recover.
- Active decentralized loans climbed above $36 billion in early 2026, driven mainly by Ethereum-based protocols.
- Aave and Morpho account for most of the renewed demand, while collateral data indicate liquidation risk remains contained, signaling cautious confidence rather than speculative excess.
Decentralized finance lending is slowly regaining traction after a prolonged downturn triggered by last year’s market stress. DeFi credit markets, which stalled following the October 2025 liquidation shock, are now recording steady increases in borrowing activity. Although volumes remain below prior cycle highs, recent on-chain data suggest crypto-native capital is returning with a more disciplined approach to risk and yield.
DeFi Credit Markets Regain Momentum On Ethereum
Recent metrics point to a gradual rebuilding phase across DeFi credit markets. Token Terminal data show that active on-chain loans reached approximately $36.6 billion by early 2026, rising about $2.1 billion from December levels. This represents the most consistent rebound since the October drawdown, when risk appetite across decentralized lending sharply declined.
Growth has been highly concentrated. Aave expanded its active loan book by nearly $1.1 billion, while Morpho added roughly $450 million over the past month. Aave continues to attract borrowers through scale, liquidity depth, and diversified collateral options. Morpho benefits from a curated lending structure that appeals to users seeking defined risk parameters. Over the past two years, Aave increased its share of total DeFi lending from around 8% to more than 28%, maintaining relevance even during extended market weakness.
Ethereum remains the central network for this recovery. The improvement in lending activity coincided with ETH reclaiming the $3,000 level, reinforcing confidence in collateral valuations. While Solana-based lending protocols posted incremental growth, their volumes remain materially smaller and more volatile compared with Ethereum.
Liquidity Conditions And Risk Exposure Stay Measured
Ecosystem-wide data reinforce the stabilization narrative. DeFiLlama estimates about $66.67 billion in total value locked across lending protocols. Ethereum-based lending generates more than $28.7 million in weekly fees, supporting a broader pickup in on-chain economic activity. Total value locked on Ethereum rose above $72 billion, up from roughly $64 billion in November.
Risk indicators suggest leverage remains manageable. Liquidatable ETH-backed loans increased to around $2.2 billion, but most positions face exposure only if ETH falls below $1,800. Loans vulnerable near current price levels represent a limited share, reducing near-term liquidation pressure.
