Nexo, a cryptocurrency lender, announced that it recently approved one of the largest loans backed by NFTs in crypto’s history and that two rare CryptoPunks Zombies were used as collateral.
Nexo granted the 1,200 Ether loan, worth more than $3 million, to an anonymous borrower who put up the Zombie NFTs as collateral. The 60-day loan carries an annualized interest rate of 21%.
The transaction shows how the financialization of NFTs has gained in sophistication since nonfungible tokens surged in crypto markets last year. The complex deal was structured with Nexo, a centralized crypto lender, issuing the loan on Arcade, a peer-to-peer marketplace for NFT lending. Nexo hedged its loan risk through investment manager Meta4 Capital.
With this multi-lateral partnership, we are demonstrating the merge between traditional, decentralized and crypto finance.
Kiril Nikolov, In charge of DeFi strategy at Nexo
Given the volatile nature of the NFT market, such financing carries more risk compared with similar loans in traditional finance. But that hasn’t stopped more people from entering the NFT lending space.
The owner of 104 CryptoPunks took out a loan worth more than $8 million on another NFT lending platform NFTfi in April. The pseudonymous owner of those CryptoPunks canceled a live auction at Sotheby’s on the same digital collectibles last minute in February. Other centralized lenders such as Genesis have also executed similar loans.
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.
Brandon Buchanan, founder and managing partner at Meta4 Capital
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Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
