(Bloomberg) —
Crypto lender Nexo says it has issued one of the largest loans backed by NFTs in crypto’s history and that two rare CryptoPunks Zombies were used as collateral.
Nexo said the 1,200 Ether loan, worth more than $3.3 million, was issued to an unnamed borrower who put up the Zombie NFTs as collateral. The 60-day loan carries an annualized interest rate of 21%.
The transaction shows how the financialization of NFTs has gained in sophistication since nonfungible tokens surged in crypto markets last year. The complex deal was structured with Nexo, a centralized crypto lender, issuing the loan on Arcade, a peer-to-peer marketplace for NFT lending. Nexo hedged its loan risk through investment manager Meta4 Capital.
“With this multi-lateral partnership, we are demonstrating the merge between traditional, decentralized and crypto finance,” Kiril Nikolov, who’s in charge of DeFi strategy at Nexo, said in a press release.
Given the volatile nature of the NFT market, such financing carries more risk compared with similar loans in traditional finance. But that hasn’t stopped more people from entering the NFT lending space.
The owner of 104 CryptoPunks took out a loan worth more than $8 million on another NFT lending platform NFTfi in April. The pseudonymous owner of those CryptoPunks canceled a live auction at Sotheby’s on the same digital collectibles last minute in February. Other centralized lenders such as Genesis have also executed similar loans.
“Like many collectors, people became attached to their NFTs, they become part of the persona, particularly online and in Web 3,” Brandon Buchanan, founder and managing partner at Meta4 Capital, said. “Many folks view NFTs as a store of value or a way to accrue Ether.”
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