NFT-Backed Loans Enhance With CryptoPunks Owner Borrowing $8M

The NFT-backed loan markets heat up after CryptoPunks owner borrowed $8.3 million in high-value NFT loan so let’s read more in today’s latest cryptocurrency news today.

The holder that decided to withdraw from Sotheby’s auction in February, now secured a huge DAI loan on 104 CryptoPunks NFTs. The loans that use high-value NFT as collateral are seemingly becoming more popular after the CryptoPunks owner took out an $8.3 million loan on the lot. The Auction house Sotheby’s was offering 104 high-value CryptoPunks NFT in February with a haul of $20 million for the set. However, the owner of the Ethereum NFT withdrew the lot a few moments before the auction started and gloated about “rugging” Sotheby’s on Twitter.

Thanks to the chads @metastreetxyz for unlocking 8.32m in liquidity on my CryptoPunks while allowing me to retain upside exposure to my collection 🔥🔥 https://t.co/r6QIdOP3Q4

— 0x650d (@0x650d) April 1, 2022

The owner of those NFTs now took out an $8.3 million dollar loan using the CryptoPunks set as collateral which is the largest loan ever reported to date. The loan tops one backed by a separate bundle of 101 CryptoPunks from a different holder that secured $8 million in March. Both loans were executed via NFTs, an NFT-backed loan marketplace, and liquditiy providing DAO offering up the funds on two occasions. The owner tweeted:

“Thanks to the chads [at MetaStreet] for unlocking 8.32m in liquidity on my CryptoPunks while allowing me to retain upside exposure to my collection.”

The NFT-backed loan sees the owner borrow 8.32 million DAI stablecoin with a 90-day repayment window and 10% APR which shows the growing trend of the NFT collectors tapping the high-value holdings to unlock the short-term liqudity rather than sell off the NFT for a one-time payout. With the NFT market exploding in value over the past year, some holders of NFT collections looked for other ways to benefit in short term from their valuable assets and this is where NFTfi comes into play.

The CEO of NFTfi Stephen Young said that his marketplace handled up to $110 million across 6500-plus loans or $70 million of that in 2022. The NFT holder can connect the wallet to the NFTfi and choose which one they will like to seek a loan on and specify the desired terms. The providers can also make offers and if accepted, the on-chain transaction will see the funds sent from the liquidity provider to the NFT holder.

Also, while some borrowers could take the NFT-backed loans to purchase even more NFTs, others are freeing up the funds for real-world uses. It is still the early days of NFT markets but Young did say that he anticipates the marekt to grow to 10% based on the total trading volume while now it is estimated at 0.5%.