Rare Zombie CryptoPunks

Collateral of two rare zombie CryptoPunks was used to secure a $3.3 million dollar loan from NFT lending platform Nexo. The loan was awarded in Ethereum (ETH) – for 1,200 Ether.

The Nexo platform stated in a press release that it was the largest NFT-backed loan in the history of non-fungible tokens. The borrower is an unknown NFT collector.

NFT Loan Platform Nexo

Kiril Nikolov, Head of DeFi Strategy at Nexo commented:

‘With this multi-lateral partnership, we are demonstrating the merge between traditional, decentralized and crypto finance.’

The loan deal was made and issued on P2P (peer to peer) marketplace for NFT lending, Arcade.xyz. That company launched on Pawn Protocol in February 2022 and has $15 – 20 million in valuable NFTs locked up, including BAYC NFTs which are worth over $300,000 each.

The NFT loan came with an interest rate of 21% per annum, and the borrower took it out for 60 days. Nexo hedged their risk with an investment manager, Meta4 Capital.

NFT Loan Nexo

The Nexo NFT loan platform

Meta4 Capital founder Brandon Buchanan commented:

‘Like many collectors, people became attached to their NFTs, they become part of the persona, particularly online and in Web 3. Many folks view NFTs as a store of value or a way to accrue Ether.’

Bloomberg noted that there was once a larger NFT loan deal struck, for $8 million, however it was reportedly cancelled at the last moment.

That NFT backed loan was applied for by the owner of a collection of over a hundred blue chip NFTs – including many CryptoPunks – on NFTfi.com.

Arcade NFT Loans

Speaking to Fortune.com, Arcade CEO Gabe Frank stated no one has defaulted yet in the four month history of the NFT loan platform.

So far Arcade has issued $10 million in NFT backed loans, at first offering its services to a vetted range of high net worth individuals, and later to the general public. Loans on its platform come with a 2% flat fee of the value of the loan, plus the interest rate.

Frank is optimistic for the growth of the NFT lending industry, and is currently working on software solutions and apps for his company to automatically value the worth of an NFT:

‘We think this market will be in the billions in a few years.’

It’s an interesting timeline we live in – scarce digital assets like cryptocurrencies and non-fungible tokens, the product of mathematics, have created a whole new market for NFT and crypto backed loans.

Even if you haven’t invested in NFTs, let alone own any expensive ones with a floor price as high as Punks and Bored Apes, anyone with a Nexo account can take out a loan, however small.

Cryptoassets are a highly volatile unregulated investment product. No UK or EU investor protection.