CryptoPunks owner borrows $8.3 million as market for Ether NFT-backed loans heats up

According to NFTfi, the loan requires 0x650d to borrow 8.32 million DAI stablecoins with a repayment period of 90 days and an annual interest rate of 10%. This is the latest example of a growing trend of NFT collectors using their prized assets to free up short-term liquidity rather than selling NFT for a one-time reward.

As the NFT market value soars over the previous year, some owners of "blue chip" NFT collectibles are looking for ways to profit from their increasingly expensive assets in the short term. NFTfi is a peer-to-peer marketplace that connects NFT owners with liquidity providers who can lend with Wrapped Ethereum (WETH) or DAI. Arcade and Drops are two other NFT-backed lending platforms.

CryptoPunks Owner Touts Sotheby's 'Rugging', NFT Auction Cancelled

According to NFTfi CEO Stephen Young, his marketplace has now processed more than $110 million in more than 6,500 loans, of which $70 million will come in 2022.

NFT holders can connect their wallets to NFTfi and select the NFT for which they are requesting a loan and the terms they want. The vendor can then provide an offer. If the on-chain transaction is approved, cash is sent from the liquidity provider to the NFT holder, and the NFT remains in an escrow smart contract for the life of the loan.

Both parties are at risk. If the borrower fails to repay the loan within the specified term, the loan is in default and the lender can foreclose and seize the assets. And, because the NFT market is notoriously volatile, there is always the risk that the seized assets will depreciate in value.