NFT lending continues to bump as over 18k ETH lent in January

According to a new report from eBit-labs, a digital research firm, NFT lending hit a record month in January, returning to numbers not seen since the sector’s previous all-time high in May 2022.

The report used chain data for loans backed by Bored Ape Yacht Club (BAYC) and examined BAYCs according to loan price, duration, liquidation value and market dominance.

Furthermore, eBit-labs discovered that the amount borrowed in January 2023 had returned to peaks not seen since May 2022. For the first time in more than nine months, the weekly lending volume was more than 6,000 ETH in the first week of January. total borrowing during January reached more than 18,000 ETH – or $30,516,660 at press time.

In mid-2022, the lending industry received a lot of attention as the falling floor price of BAYC triggered market pressure and heightened concerns about potential liquidation, ultimately leading to a liquidity crisis, the report also found.

The competition between the platforms is becoming more intense

Since its launch, BendDao has maintained a consistent maximum upfront rate of 40%, notably lower than the advanced rates of up to 80% offered by other peer-to-peer NFTfi platforms.

However, in September 2022, X2Y2’s entry into the market disrupted this status quo by offering advance rates exceeding 100%. As a result, BendDao faced intense competition and user decline, prompting it to increase its advance rates to 60% to remain competitive. This adjustment was made during the winter holidays.

Peaks in January 2023

Several factors drove January’s increase in NFT lending, the report says. A major factor was market glut and Yuga Labs’ Dookey Dash News, which encouraged users to increase Yuga-related lending activity. According to research, the bulk of loans issued on the three primary lending platforms were towards Bored Apes, with short-term loan balances for BAYC reaching a record high in January 2023.

Insight

The data shows that the overwhelming majority of loans are either paid off or liquidated within a single day, with long-term loans making up a much smaller proportion of the total. This trend suggests that potentially many borrowers are using these loans to meet immediate liquidity requirements rather than as a hedge against market value fluctuations.

A lull in activity between 6:00 a.m. and 2:00 p.m. (UTC) on weekdays—outside of the general U.S. waking hours—suggests that a significant portion of the activity occurs in the United States.

In general, the report concluded that:

“The availability of NFT loans meets a valuable market need and helps drive the ongoing development and sophistication of the entire NFT ecosystem. The drivers for borrowing are likely to be wide-ranging, but it is clear that these loans can meet both short- and long-term liquidity needs and also provide valuable market value hedges.”