DeFi Sector Expands in 2025 Even as TVL Drops During Market Selloff

DeFi Market Overview and Key Developments in 2025

• In early October 2025, the total value locked (TVL) in DeFi platforms peaked at $171.9 billion, but later dropped by 25.5% amid widespread market downturns.
• Lending and borrowing protocols led the DeFi sector, accounting for 27.33% of the market share during 2025.
• The global DeFi market was estimated at $26.94 billion in 2025, with forecasts suggesting it will rise to $37.27 billion by 2026.

Throughout 2025, the DeFi industry saw remarkable expansion, with TVL reaching $171.9 billion by October. This growth was largely attributed to the launch of new tokens and the proliferation of multichain DeFi ecosystems. However, this upward trend was short-lived, as TVL fell by 25.5% following significant selloffs and broader economic challenges.

Despite these ups and downs, the DeFi sector was valued at $26.94 billion in 2025 and is anticipated to reach $37.27 billion in 2026. The adoption of tokenized real-world assets and the growing popularity of decentralized exchanges (DEX) are expected to be major drivers of this expansion.

Lending and borrowing platforms stood out as a dominant force, representing 27.33% of the DeFi market in 2025. By the end of the year, these protocols made up two-thirds of the $73.6 billion crypto-backed lending market, with Aave V3 maintaining a leading position.

Factors Behind the DeFi TVL Decline in Late 2025

From the end of Q3 to the close of Q4 2025, DeFi TVL dropped from $156.7 billion to $116.7 billion. This decrease mirrored a broader market correction and was influenced by global economic factors, such as renewed tariff threats from Trump targeting China. As a result, DeFi market capitalization plummeted by 37.2%, falling from $181 billion in late September to $100.9 billion by year-end.

Emerging Sectors Poised for DeFi Growth

While lending and borrowing platforms held the largest share in 2025, tokenized real-world asset (RWA) platforms are projected to experience the fastest growth through 2031. The United States is expected to lead this expansion, with a projected compound annual growth rate (CAGR) of 67.7% from 2026 to 2033. Decentralized exchanges (DEX) also demonstrated robust performance, generating $4.49 billion in revenue in 2025.

Risks and Challenges Facing DeFi in 2026

In 2025, the DeFi industry suffered losses totaling $512 million due to exploits, including a significant $223 million breach involving Cetus. Security vulnerabilities remain a pressing concern for DeFi protocols, and investors are urged to exercise caution as the sector grows. Prediction markets also gained traction, with Kalshi overtaking Polymarket in market share by the end of 2025.

Despite these obstacles, the DeFi market is forecasted to expand rapidly through 2033, with an estimated CAGR of 68.2% and a projected market value of $1,417.65 billion. However, this rapid growth is likely to attract increased regulatory scrutiny, which could influence future development.

The Asia Pacific region is also expected to see substantial growth, with a projected CAGR of 70.2% from 2026 to 2033, highlighting the global momentum behind DeFi innovation.

Overall, the DeFi landscape continues to evolve, with major players such as Aave, Lido, and Kalshi shaping the industry's direction. Although TVL has experienced volatility, the sector's expanding use cases—particularly in lending, RWA tokenization, and decentralized exchanges—are set to drive sustained growth in the years ahead.