NFT lending continued its surge with over 18k ETH borrowed in January

According to a new report from digital asset analytics firm eBit, NFT lending posted a record month in January, returning to numbers not seen since the sector’s previous all-time high in May 2022.

The report used Bored Ape Yacht Club (BAYC) backed loan sequencing data and examined BAYCs according to loan price, term, liquidation value, and market dominance.

Moreover, eBit Labs discovered that the amount borrowed in January. 2023 has returned to peak levels not seen since May 2022. For the first time in over nine months, weekly loan volume totaled more than 6,000 ETH in the first week of January. Moreover, total borrowing during January was over 18,000 ETH — or $30,516,660 as of press time.

The report also found that in mid-2022, the lending industry received widespread attention as a drop in BAYC’s underlying price triggered market pressures and heightened concerns about potential liquidation, ultimately leading to a liquidity crisis.

The competition between platforms is getting intense

Since its launch, BendDao has maintained a consistent max advance rate of 40%, significantly lower than the 80% advance rates offered by other peer-to-peer NFTfi platforms.

However, in September 2022, X2Y2’s entry into the market disrupted this status quo by offering advance rates in excess of 100%. As a result, BendDao faced stiff competition and user attrition, which led them to raise their advance rates to 60% to remain competitive. This adjustment was made during the winter holiday season.

January 2023 Tops

The report says several factors drove the January surge in NFT lending. One of the main factors was the glut in the market and the Dookey Dash news from Yuga Labs, which encouraged users to ramp up their Yuga-related lending activity. According to the research, the bulk of loans issued across the three primary lending platforms were against Bored Apes, with BAYC’s short-term loan balances reaching record levels in January 2023.

ideas

The data shows that the vast majority of loans are either paid off or liquidated within one day, and long-term loans make up a much smaller part of the total. This trend indicates that many borrowers may use these loans to meet immediate liquidity requirements rather than hedge against market value fluctuations.

The lull in activity between 6:00 and 14:00 (UTC) on weekdays — outside of US general waking hours — indicates that much of the activity is happening within the United States.

Overall, the report concluded:

“The availability of NFT lending addresses the value needs of the market and helps to promote the continued development and evolution of the entire NFT ecosystem. The drivers for borrowing are likely to be wide-ranging, but it is clear that these loans can meet both short- and long-term liquidity needs and also provide valuable hedges in the market.” .