NEXO Provided a $3.3 Million NFT Loan to the Owner of Cryptopunk

An anonymous borrower took two rare cryptopunks as collateral and obtained a 1200eth loan from NEXO, a cryptocurrency lender.

NEXO lent more than $3.3 million at an annual interest rate of 21% to a cryptopunk owner who provided two cryptopunks with rare “zombie” characteristics as collateral. The deal involves multiple parties, including the decentralized financial market and NFT lending platform arcade, as well as investment manager meta4ccapital.

“Through this multilateral cooperation, we have demonstrated the merger between tradition, decentralization and cryptocurrency finance,” said kiril Nikolov, director of DeFi strategy at NEXO. Bloomberg said the deal is an example of how complex the NFT financing market has become.

You can get immediate liquidity of 10-20% of the value of your bored ape yacht club or cryptopunk NFT, which must exceed $500000 without selling NFT. If NFT does not belong to cryptopunks or bored ape Yacht Club series, the application process may be longer. Liquidity can be obtained with eth or stable currency. If the value of NFT changes when the funds are borrowed, they will not be liquidated. The annualized lending rate ranges from 12% to 15%, but it depends on market conditions and the NFT provided, not your credit history.

NFT loan is a financial transaction with greater risk than traditional loan, because NFT is more volatile than traditional collateral required by traditional financial lending institutions. The main purpose of NFT loan is to increase the liquidity of NFT by allowing users to obtain funds that can be used for other projects and services. NFT supported loans can also be used to buy multiple NFTs, buy tokens that can be converted into legal currency, or buy other tokens that can realize returns in the DeFi protocol to generate revenue.

Growing Appetite For NFT Loans

If you are an investor, you can lend cryptocurrency to individuals seeking credit. It is assumed that the borrower is unable to repay the loan and interest at the end of the loan period. In this case, the lender is eligible for the relevant NFT.

Despite the associated risks, however, there seems to be a growing appetite for NFT loans. Nftfi, a cryptocurrency lending company in South Africa, recently lent $8 million to the owners of more than 100 cryptopunks, who withdrew them from Sotheby’s auction in February. Lenders like Genesis also issued NFT mortgages.

NFT is Associated With People’s Identity

For many NFTs owners, digital collections are irreversibly linked to their online identity, marking their unique “brand”. Take the owners of bored ape Yacht Club NFTs as an example. They are granted membership in the elite community. Platforms like NEXO provide the opportunity to generate mobility without losing your NFT and therefore membership in the relevant communities.

Brandon Buchanan, founder of Meta4 capital, said: “like many collectors, people begin to be attached to their NFTs; they become part of the role, especially online and Web3.”