NFT owner takes an $8.3M loan using CryptoPunks as collateral

A pseudonymous owner of CryptoPunks NFTs that were to be offered on the Sotheby auction house has taken an $8.3 million loan using CryptoPunks as collateral. This is the largest loan in this space to date.

$8.3M NFT loan

The loan was taken on April 1, and it is backed by another set of 101 Cryptopunks from a holder that received an $8 million loan in early March. The two loans were offered on the NFTfi marketplace with MetaStreet, a decentralized autonomous organization offering liquidity.

A tweet by ox65od said, “Thanks to the chads [at MetaStreet] for unlocking $8.23M in liquidity on my Cryptopunks while allowing me to retain upside exposure to my collection.” the loan will have ox65od borrow $8.23M of the DAI stablecoin with a 90-day repayment period and a 10% Annual Percentage Return.

This is one of the best examples showing the massive growth of the NFT sector. NFTs have gained significant value over the years, and this move shows that it is possible to secure short-term liquidity from these assets other than selling them to unlock value.

NFT loan marketplaces

Over the past year, the NFT market has grown significantly. Some holders of valuable collections in the market have been looking for ways to create short-term liquidity from their holdings, and NFT loan marketplaces have provided the ideal solutions.

NFTfi is an NFT marketplace that links NFT owners with liquidity providers, where loans are issued in wrapped Ethereum (wETH) or the DAI stablecoin. Other NFT loan marketplaces include Arcade and Drops.

According to the CEO of NFTfi, the platform has handled over $110 million in loans, and $70 million of this was handled in 2022. When using the platform, an NFT holder can link their wallet to NFTfi and select the NFTs they want to use for the loan and agree to the loan terms. The funds will be transferred from the liquidity provider to the NFT holder, and the NFT used as collateral will be held in escrow for the loan duration.