Cryptocurrency lending is nothing new on the market, but that's not the case with non-fungible tokens. While the total value locked in the lending market surpassed the $37 billion mark, NFTs are still quite a new thing, which means there're still many unexplored use-cases for the new area of the market.
And that's how a pseudonymous owner of CryptoPunks tokens under the alias 0x650d made headlines. The investor used 104 NFTs from the collection as collateral to take out an $8.3 million in the DAI stablecoin. As per 0x650d, the deal was secured via liquidity providers MetaStreet and NFTfi.
While details of the loan remain undisclosed, reports say this is the largest NFT-backed loan to date. In an interview with Decrypt, NFTfi head Stephen Young revealed that the NFT lending market is heating up pretty fast, adding that his platform has handled $70 million across 4,000+ NFTs since the beginning of 2022.
However, there're still many risks in using crypto/NFT-backed loans. For instance, if a borrower fails to pay off the whole loan in the set timeframe, the loan defaults. The lender then could foreclose and claim the asset. And while cryptocurrencies are notoriously volatile, NFTs are even more dangerous in this case, which means that a seized asset could drop in price significantly in a short matter of time.
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