In January 2023, NFT financing skyrocketed, with BendDAO being the largest initiative in this category.
From the beginning of 2023, NFT financing has become a trend as the business witnesses a rebound in key indicators.
According to research by The Block Research, on-chain data indicated that the total monthly borrowing across NFT lending procedures hit its highest level since the middle of 2022.
The trend has been driven by a variety of causes, such as a recent boom in NFT markets, the advent of lending protocol BendDAO, and a rise in loan activity around Yuga Labs’ NFTs.
According to The Block Research, BendDAO has already surpassed its competitors by holding a 43 percent market share, while NFTfi is behind with 32 percent of the overall borrowing volume.
The success of BendDAO is mostly attributable to its user-friendly platform, which enables users to borrow instantaneously to address short-term liquidity requirements. BendDAO allows users to extract liquidity from the protocol by taking out loans against pools of blue-chip NFTs, referred to as “peer-to-pool.” This is in contrast to competing protocols that employ the more prevalent peer-to-peer alternatives.
The majority of lending and borrowing on BendDAO includes the Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC) collections from Yuga Labs. According to Block analyst Thomas Bialek, this has become one of the primary drivers for the increase of NFT financing.
On BendDAO, MAYC and BAYC NFTs have accounted for the bulk of loans, comprising 78% of the total loan amount, according to on-chain statistics compiled by Dune Analytics.
There is a similar tendency on other sites. According to a study from the research company eBit Labs, which was released exclusively with The Block, lending against Bored Apes “drives the bulk of NFT loans” across the three lending platforms BendDAO, X2Y2, and NFTfi.
According to eBit Labs, short-term loans for BAYC hit all-time highs in January, and a considerable proportion of these loans are liquidated within two days.
“BAYC and MAYC NFTs are the most often utilised collateral for NFT-backed loans,” Bialek said. NFT lending services provide a means for traders to have access to rapid liquidity without selling assets. The loan market made news for the first time in the middle of 2022, but liquidity concerns arose as floor prices dropped. Nowadays, there seems to be a revival.