Someone Borrowed $1.3 Million From Ethereum Using Mutant Ape NFTs As Collateral

DeFi lending was already big business, but a rapidly growing niche is borrowing against valuable NFTs and using them as collateral for loans. Mutant Ape Yacht Club pair NFT holder Fragment borrowed 1,000 ETH, or roughly $1.3 million, today using the starred JPEGs as collateral.

“It’s great to see these loans being funded in this market climate, and even more so that everything is happening on-chain via DeFi,” Gabe Frank, CEO of lending company NFT Arcade, told Decrypt. Arcade has facilitated the latest stunning loan.

“Prices have stabilized and volatility has fallen, so lenders seem more willing to take on larger loans,” Frank explained. “At the same time, mega mutants are incredibly rare assets.”

This particular loan is a non-recourse loan, which means that the lender can seize the loan collateral in the event of default. The lenders on the other end of Fragment’s Mutant Ape loan are Nexo and Meta4 NFT Lending. According to Arcade, the loan repayment terms are 1,044 ETH in 90 days at an APY of 18%.

“If the borrower defaults, the lender has a chain claim on the protocol collateral,” Frank previously said. Decrypt. “So the lender can claim the assets, unpack them, and then sell them if they have to, or keep them on their balance sheets.”

Non-fungible tokens, also known as NFTs, are cryptographically unique tokens tied to digital and physical content, memberships, or proof of ownership.

“We build IPs around [Mega Mutants]starting with @AppliedPrimateso we seek to have more Megas to participate in our universe”, founder of Fragment MTP Told Decrypt.

“The idea here was how to get money quickly to take advantage of an opportunity. The loan was the right choice for what we needed,” PTM explained. “We will probably unwind the loan within 90 next few days.”

In March, a CryptoPunks holder used his collection of 101 NFTs to borrow $8 million. In April, another CryptoPunks holder opted out of an auction at Sotheby’s and instead borrowed $8.3 million in DAI using the 104 NFT lot as collateral. These borrowers facilitated lending through NFTfi, an NFT-backed lending marketplace.

According to Arcade, there has been a steady increase in NFT borrowing since June 2022, with a high of $2.5 million in September, although most activity remains in the buying and selling of NFT, with 11, $1 million in September, according to Arcade.

Blue chip NFT holders see borrowing against their collections as a lucrative option that, unlike selling their NFTs, would allow them to retain ownership.

As long as they don’t default on the loan, in which case it’s goodbye JPEG.

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