After a prolonged slowdown triggered by a sharp liquidation event in October 2025, decentralized finance (DeFi) credit markets are showing clear signs of stabilization and renewed growth in early 2026. Lending activity, which had stagnated due to frozen risk appetite, has begun to climb steadily over the past three weeks, marking the strongest rebound since last autumn's market shock.
Data from Token Terminal indicates that total active on-chain loans have reached approximately $36.6 billion, an increase of about $2.1 billion from December levels. While still below previous peaks, this growth signals a return of lending demand, largely driven by a small group of dominant protocols. Aave has added around $1.1 billion in active loans over the past month, solidifying its position as the backbone of on-chain credit with its share of DeFi lending climbing from about 8% to over 28% in the past two years. Morpho has also seen significant expansion, growing by roughly $450 million, attracting users with its curated lending model for tailored risk and return profiles.
Ethereum remains the undisputed core of DeFi lending, with its recovery coinciding with ETH reclaiming the $3,000 price level. Lending protocols on Ethereum alone now generate more than $28.7 million in weekly fees, and the network's total value locked (TVL) has risen above $72 billion from around $64 billion in November. According to DeFiLlama, lending protocols across all chains secure about $66.67 billion in TVL, with a gradual recovery underway.
The report notes that collateral dynamics suggest contained risk, with most liquidatable ETH-backed loans only becoming vulnerable if ETH falls below $1,800. The stabilization is viewed as an early indicator of improving confidence in the DeFi ecosystem, potentially signaling a broader recovery. This revival is also influenced by evolving regulatory frameworks, such as the U.S. GENIUS Act and the EU's MiCA, which are anticipated to bolster market trust and institutional adoption.
