NFT collector places 101 CryptoPunks as collateral for an $8M loan

An NFT collector has received an $8 million loan after placing 101 CryptoPunks as collateral. Another collector donated Punk #5364 to Ukraine.
An NFT collector has received an $8 million loan after placing 101 CryptoPunks as collateral. Credit: MetaStreet

Key Takeaways

  • An NFT collector has recieved an $8 million loan using 101 CryptoPunks as collateral.
  • Another unidentified donor sent Punk #5364 to Ukraine in support of the country’s war efforts.

YEREVAN (CoinChapter.com) – The nonfungible token (NFT) industry has just recorded its largest loan. In a surprising move, an unidentified collector placed 101 CryptoPunk NFTs as collateral to receive a loan to the tune of $8 million.

In particular, the anonymous collector received the money in DAI, one of the popular stablecoins. 

Liquidity scaling solution MetaStreet facilitated the loan backed by the popular P2P lending platform NFTfi. Reportedly, the loan has an annual percentage rate (APR) of 10% with a 30-day duration.

Recommended: Does the NFT industry pose a threat to the global art market — experts weigh in

Both NFTfi and MetaStreet confirmed the news through separate posts on social media giant Twitter.

The development will add credibility to the fast-growing nonfungible token industry. As more people get NFT-backed loans, it will help prove that digital collectibles, after all, have real-life utility and value.  

“I think [NFT] borrowing markets will just grow bigger and bigger, which means its purchasing power will increase. It’s like instead of putting all of your money into buying a house, you get a mortgage, which means you don’t have to pay that 90% until later. I think we’re extending the purchasing power of the entire industry,” 

MetaStreet, CEO David Choi said. 

NFTfi continues to disrupt the loan industry 

Nonfungible tokens are making inroads into and disrupting many traditional financial industries. Meanwhile, NFTfi, the South-African startup, is normalizing NFT-backed loans. 

Thanks to its blockchain technology, defaulters automatically forfeit their NFT to those granting a loan if they fail to pay pack within the period agreed upon.

Late last year, the company made headlines after facilitating a $1.4million loan backed by an NFT. The collector had placed Autoglyph #488 as collateral against the loan.

Autoglyph #488, the NFT that its owner used as collateral against a $1.4million loan last year.
Autoglyph #488, the NFT that its owner used as collateral against a $1.4million loan. Credit: NFTfi

NFTfi also raised $5 million in Series A funding last November. According to the company, collectors are also using other popular projects to get loans on their platform. Besides CryptoPunks, the company has seen people use NFTs from Bored Ape Yacht Club (BAYC), World of Women (WOW), and Mutant Ape Yacht Club (MAYC), among others.

Recommended: Man takes OpenSea to court over his stolen Bored Ape (BAYC) NFT

Stephen Young, Founder, and CEO of NFTfi, expects nonfungible token-backed loans to grow in the future.

“We believe the NFT-backed loan market will grow in days to come – the current loan market is tiny compared to the overall sales volumes for NFTs. In addition, we see loans using NFTs as collateral being even more useful in an NFT market where the prices aren’t doubling every few days. This is just the start for the future of NFTs; expect to see many more loans of this magnitude and bigger in the future,”

Stephen Young, Founder and CEO of NFTfi told CoinChapter.

According to Young, the 10% APR on this loan is a clear sign that the top-tier NFT projects are excellent collateral and holders can obtain liquidity at a reasonable cost of capital.

Recommended: Sotheby’s auction of 104 CryptoPunks NFTs, estimated to fetch $30M, canceled

Some industry insiders disapprove of NFT-backed loans

Last December, Jesse Powell, the Co-Founder and CEO of Kraken informed reporters that the firm plans to enter the lending industry. According to Powell, one of the major crypto exchanges will offer NFT-backed loans to its users of its in 2022. The exchange is planning to launch its NFT marketplace this year.

Kraken’s plans give credibility to what NFTfti has been doing so far. In addition, it will help cement the utility value of nonfungible tokens, attracting more buyers in the days to come.

However, not everyone in the industry finds merit in NFT-backed loans. According to Jonathan Teplitsky, the founder and CEO of NFT platform Pipe Flare, the idea is too risky. The sheer volatility of the space makes nonfungible tokens too unstable in value to count as collateral.

“Having NFTs act as collateral in a loan is essentially like backing a mortgage with a pair of magic beans. NFTs are among the riskiest crypto assets available on the market, even more so than meme coins. If NFTs are to become loan collateral, they will need to have a rating system similar to bonds or stocks,” .

Teplitsky tells CoinChapter

Teplitsky further argues that the 2018 crypto market crash, which saw many leading tokens crash as much as 78%, should serve as a warning to those advocating using NFTs as collateral against loans.

Recommended: After XRP, the U.S. securities regulator goes after the booming NFT sector

Someone donated a CryptoPunks NFT to help Ukraine

In another major development involving CryptoPunks, a collector has donated a punk NFT from his collection to help Ukraine.

After the Ukrainian authorities appealed to the crypto community for donations last week, people have been sending help in whatever crypto they hold. As support to the tune of millions continues to pour in, the NFT space has now joined the efforts in backing the country’s fight against what it calls a full-out Russian invasion.

The unidentified donor parted with Punk #5364 in his effort to help. The punk already has a bid of 38 ETH or $112,912 on it.

An NFT collector has received an $8 million loan after placing 101 CryptoPunks as collateral. Another collector donated Punk #5364 to Ukraine.
CryptoPunk #5364 that the owner donated to Ukraine. Credit: LarvaLabs

According to the OpenSea page of the anonymous donor, they hold at least 7 more CryptoPunks. The collection also includes 78 tokens from several famous projects.

As NFTs continue to prove real-life value, the popularity of the industry will increase in the days to come. 

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NFT, NFT collector places 101 CryptoPunks as collateral for an $8M loan

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