The lending market based on non-fungible tokens (NFT) as collateral exceeded $2 billion in volume in the first quarter, registering 44% growth compared to the fourth quarter of 2023, according to a report from CoinGecko.
“Crypto markets are all about market rotation […] There is clearly a trend of OG NFT holders taking advantage of this [lending] platforms to gain liquidity and take advantage of the positive sentiment of the market with meme coins and other things,” explains NFT Price Floor analyst identified as Nico.
He cites as an example the move by SquiggleDAO, which used part of its Chrome Squiggles holdings as collateral to get a $1 million loan through Zharta Finance, and used the money to invest in other assets. However, once investors are done making profits with the current narratives, Nico foresees the money flowing into Bitcoin, Ethereum and blue chip NFTs, including new collections created on Bitcoin infrastructures.
Blend shows strong dominance
Credit platform Blend showed significant dominance in the market, capturing almost 93% of the market share as of March 2024 with a monthly lending volume of $562.3 million.
Since its founding in May 2023 by leading NFT marketplace Blur, Blend has quickly risen to market dominance, initially capturing an 82.7% share. Blend’s share, which consistently leads the market, has fluctuated between 88.8% and 96.5%. The first quarter of 2024 marked a 49.2% quarter-over-quarter (QoQ) increase in Blend’s NFT lending volume, totaling over $2.02 billion.
While Blend leads the way, Arcade and NFTfi follow as notable smaller players in the NFT lending space. Arcade has a 2.8% market share with a lending volume of $16.9 million, and NFTfi follows closely behind with a 2.2% share compared to a $13.3 million volume in March 2024. Both platforms have since maintaining a monthly market share of more than 1% the previous year.
Arcade’s NFT loan volume reached a new quarterly record of $39.4 million in the first quarter of 2024, up 37.1% quarter-over-quarter. NFTfi also saw a significant increase of 48.3% quarter-on-quarter, reaching a lending volume of $35.8 million. With the recent token launch of Arcade and the expected token release of NFTfi, the industry is watching closely to gauge the potential impact on their respective lending volumes.
Other NFT lending platforms, such as X2Y2 (X2Y2) and BendDAO (BEND), each have 0.8% market share, while Parallel Finance (formerly ParaX) accounts for 0.5% of the market.
January 2024 alone saw a record $900 million in total monthly NFT loans, surpassing the previous peak of $850 million in June 2023.
As Ethereum NFT collections remain the primary collateral for loans due to the synergy between Blend and Blur, the growing popularity of Bitcoin Ordinals introduces a new variable in the future trajectory of the NFT lending market.
