THE HOLDER of two Mutant Ape Yacht Club NFTs has borrowed 1,000 ETH – around $1.3 million – using the JPEGs as collateral.
Borrowing against valuable NFTs and using them as collateral for loans is growing in the Web3 space.
CEO of NFT lending company Arcade Gabe Frank said: “It’s awesome to see these loans getting funded in this market climate, and more so that it’s happening all on-chain via DeFi.
“Prices have stabilized some, and volatility has dropped, so lenders seem more willing to underwrite larger loans.
“At the same time, the mega mutants are incredibly rare assets.”
The owner will need to pay 1,044 ETH back in 90 days – which works out at 18 per cent APY.
The lender – Nexo and Meta4 NFT Lending – can seize the loan collateral in the case of default.
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Frank said: “If the borrower defaults, the lender has an on-chain claim to the collateral in the protocol.
“So the lender can claim the assets, unwrap it, and then sell it if they have to, or keep it on their balance sheets.”
In March, one person who owned CryptoPunks was able to borrow $8 million by putting up 101 NFTs as collateral.
In April, another person used 104 Crypto Punks to borrow $8.3 million in DAI.
NFTfi, a loan marketplace that is backed by NFTs, helped both people get loans.