The NFT Marketplace is a sector of the crypto ecosystem that has grown exponentially over the past year. But as sales have fallen in recent months, blue-chip NFT holders are looking for other opportunities to scale.
NFT’s global sales volume reached $4.6 billion in January but fell nearly 50% to $2.4 billion in late March, according to data from NFT data aggregator CryptoSlam.
Weak projects with loosely connected communities may be partly responsible for the decline in overall NFT sales, according to the founder of Burnt Finance, known by the alias Burnt Banksy.
While total NFT sales have fallen, advanced NFT projects such as Bored Ape Yacht Club (BAYC), Mutant Ape Yacht Club (MAYC), and Azuki have increased by 169%, 199.6% and about 146% respectively in the past 30 days , according to CryptoSlam data.
While some NFT owners are selling their digital assets, others have “strong beliefs” in their NFTs and want to hold onto them, Banksy said. So there is an increase in NFT loans as owners want to use them as assets to gain liquidity and in turn generate extra returns elsewhere or buy more assets, he added.
According to data from Dune Analytics user Gideontay, NFT lending volume on decentralized NFT marketplaces Arcade and NFTfi is up 171% from $30.63 million in Q4 2021 to $83.17 million in Q1 2022.
“Most of the credit market is focused on the established high-quality NFT collections,” Stephen Young, CEO of NFTfi, told Marketingwithanoy. “While overall NFT sales may be lower, the top projects still retain significant value.”
As with other assets, people borrow their NFTs to gain liquidity and maximize their own capital efficiency, Marco Manoppo, research director at Digital Asset Research, told Marketingwithanoy.
“This can be done through notable crypto brokers like Genesis or through decentralized applications that seek to facilitate NFT lending through smart contracts, adhering to a certain set of parameters to manage liquidation risks,” he said.
Arcade specializes in providing NFT owners with the opportunity to get a loan by putting up their digital collectibles as collateral, rather than having to provide another asset like a house or car. The company’s platform has approximately $17 million in loan volumes and more than $25 million in blue-chip NFTs locked in escrow, said Gabe Frank, CEO and co-founder of Arcade.
“If primary NFT sales are declining and lending is increasing, it’s because there’s more awareness and education about what people can do with their NFTs,” Frank said.