Largest NFT Backed Loan Ever issued for $8 Million
Decentralized finance (DeFi) and Non-Fungible tokens (NFTs) are two of the hottest segments of the blockchain space currently as they have taken the promises of crypto and began to materialize them into products with real world use cases. DeFi has paved the way for activities like staking, yield farming, lending, and borrowing on the blockchain. NFTs have transformed how collectors think about investing their money with the rise of digital collectables and the promise of the metaverse. DeFi and NFTs are said to represent the future of finance, and the credit markets, as we will see, are surely to be included.
Recently an anonymous “whale” has secured the largest ever NFT collateralized loan for a whopping $8 Million which has been backed with their collection of 101 CryptoPunks. The loan was completed by NFT liquidity scaling startup MetaStreet on peer-to-peer lending platform NFTfi. MetaStreet co-founder Conor Moore said, “By having an active borrowing and lending market [in NFTs], you create productive assets that are otherwise viewed as unproductive.” The loan has an APR of 10% and a 30 day duration which keeps in line with the theme of previous NFT backed loans as they tend to be shorter in duration. Financing of this magnitude being secured even while the crypto markets as a whole are far from their all time highs has been seen as indicative of the very real future of lending secured by digital assets. Many industry participants expect this market to see continued growth as institutional interest continues to build.
MetaStreet, the firm issuing the loan, has eight full time employees, secured $3 Million in seed financing, and $11 Million in initial protocol liquidity earlier this year. The firm provides a layer of financial infrastructure for NFTs, specifically via lending protocols such as NFTfi and Arcade. However, this latest loan is much larger than the previous biggest which was also issued by MetaStreet last year for $1.42 Million and was collateralized by an Autoglyph.
Collateralized loans are nothing new and have been used forever within credit markets. For many deeply involved in the crypto industry it was only a matter of time before developers discovered a way to harness the power of DeFi for NFT-backed loans on the blockchain. With projects such CryptoPunks and Bored Ape Yacht Club selling for hundreds of thousands to millions of dollars, digital art more than passes the test to be viewed as a collateralized asset in the eyes of many. With NFT backed loans providing a new way for market participants to access liquidity when they need it, and borrowing markets continuing to grow bigger and bigger, this seems to be just the tip of the iceberg compared to what will likely play out in this area over the remainder of the decade.