NFT Lending Volume Soars on Action by Whales

by James · July 6, 2022

The NFT lending volume increased to its highest level in two months over the weekend, with $ 3.5 million in nonfungibles changing hands on July 3 via NFTfi, a marketplace for loans secured by NFTs.

The activity was discovered by Richard Chen, a general partner in the crypto investment company 1confirmation.

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Two whales

Chen dived deep into the data, and discovered that $ 3.16M was borrowed by just two whales using NFTfi on July 3rd. The whales borrowed 21,500 DAI against each of their 147 combined CryptoPunks, with the metaverse interest rate protocol MetaStreet acted as the sole lender for the loans.

Some twitter users claimed that the two whales may be the same person. «Are you sure this is 2 people? These 2 collections have a very similar pattern, ” commented Tschuuuuly. “It’s the same person,” added hicryptopete.

Airdrop

The increase in activity has sparked speculation that NFTfi may be preparing to launch an airdrop for users.

Andrew T from the wallet analysis company Nansen twitret that he recently wrote about “an unannounced increase the NFTfi has made in the last three months” which has raised USDC worth about $ 1 million for the platform. “Between that and this possible air droplet farming could be a sign on the horizon,” he said.

Other respondents are skeptical, with IAmThatLemon suggests the activity is a sign of money laundering.

NFTfi is an early leader in the emerging lending sector for non-fungible funds. The protocol facilitated 13,402 NFT loans worth $ 217.6 million since its launch in 2020.

NFTfi continued to gain momentum in early 2022 despite the broader downward trend in the crypto market, with the platform handling record highs worth $ 48.7 million in April. The protocol also hosted a record number of users in May, with 589 borrowers and 208 lenders active on the platform over the course of a month.

Lending activity

However, volume declined over the past two months as capitulation seized investors from digital assets, with loans worth $ 15.8 million taken out during June.

The platform caters to short-term lending activity, with loans lasting 33 days on average and providing around 4% for borrowers – equivalent to 42% annually. Bored Apes and CryptoPunks have secured about a third of the loans taken out on the platform over the years.

While the NFTfi dominates the non-fungible lending sector with loans worth $ 172 million arranged in 2022, it is beginning to face competition from rival protocols.

Arcade, an NFT lending platform launched by a third-generation Texas mortgage lender, raised $ 15 million in a Series A financing round in December. Arcade’s founder says the platform has hosted $ 25 million loans since it was released in January.

Dissemination of protocols

Drops, another rival NFT lending protocol, has also enabled $ 7 million in non-fungible-backed loans since its launch in July 2021.

In a recent appearance on The Defiant Podcast, the prolific NFT collector, Gmoney, claimed that despite the recent proliferation of protocols enabling peer-to-peer loans backed by NFTs, the next limit for NFT lending would be “peer-to-protocol lending.”

“At the moment there is no peer-to-protocol lending, there is more peer-to-peer. I think the problem people are trying to solve is how to make it a peer-to-protocol lending environment … I know that Many teams are trying to solve this problem, he said.