DeFi borrowing activity has cratered in recent weeks, as traders scrambled to exit risky positions during a period of intense crypto market volatility. The sharp downturn marks one of the steepest deleveraging episodes in decentralized finance to date.

According to data from DeFi analytics platform DefiLlama, the total value of assets borrowed on Aave, the largest decentralized lending protocol, has plummeted to $10 billion — down from more than $15 billion at its December peak. Morpho, another major platform, saw a parallel decline to $1.7 billion from $2.4 billion.

The downturn has been driven by a wave of liquidations and loan repayments as crypto prices tumbled. Bitcoin (BTC) and Ethereum (ETH), often used as collateral in DeFi, fell between 10% and 15% over the weekend, briefly dipping below $75,000 and $1,500 respectively.

“This is a classic deleveraging cycle,” said Ryan Rodenbaugh, CEO of Wallfacer Labs. “Traders are reducing exposure across the board, and borrowing activity has dried up as a result.”

The average yield paid to stablecoin lenders fell to just 2.8% on Tuesday — the lowest in a year — according to data from vaults.fyi. That’s significantly lower than the 4.3% offered by traditional U.S. money markets, and a steep drop from the 18% peak seen in December.

Despite the drawdown, lending capital remains available on most platforms, but the lack of demand has dragged returns lower. “There’s less borrowing, but just as many lenders — so the pool of returns is smaller,” Rodenbaugh explained. “It’s a tough environment.”

This deleveraging was intensified by major liquidations, including a $74 million DAI loan on Sky (formerly MakerDAO), backed by over 67,000 ETH. Another borrower reportedly rushed to repay $38 million of their $66 million debt to avoid liquidation.

While large players like Aave absorbed over $110 million in forced liquidations, the market appears to be stabilizing — for now. Whether borrowing activity returns will depend on how quickly sentiment in the broader crypto market recovers.