The private credit market hit its worst quarter in years. New loan issuance plunged about 40% to $44.76 billion for the three months ending May 2026, down from $74.56 billion in Q1.
Fundraising was flat, with private credit funds pulling in $45 billion in commitments during the first four months of 2026, according to Preqin data. That's nearly unchanged from $44.5 billion in the same period last year.
Fitch reported the US private credit default rate hit a record 6.0% in April 2026. Consumer products and healthcare sectors are especially hard hit. Major fund managers including BlackRock and Blackstone face significant redemption requests, leading to asset sales and gating strategies to manage liquidity.
On-chain tokenized credit is expanding rapidly. Active on-chain loans surpassed $14 billion by Q2 2026, a threefold increase from early 2025. However, tokenized credit remains a fraction of the traditional market, which issued $44.76 billion in new loans in a single quarter.
The risk is that tokenized credit inherits the same problems. If default rates climb because borrowers can't service their debt, blockchain doesn't improve credit quality. Investors should track whether the private credit default rate stabilizes or continues rising past 6%, and whether tokenized platforms maintain underwriting discipline as they scale.