NFT sales pick up after launch of peer-to-peer lending site

SALES of non-fungible tokens (NFTs) – digital pictures of apes and cupids – appear to be climbing from the lowest levels since 2021 after NFT marketplace Blur launched its lending programme.

The peer-to-peer perpetual lending platform called Blend, which debuted on May 1, is designed to improve NFT liquidity and lets owners borrow against their digital pictures within seconds. It also allows users to buy valuable NFTs for just a fraction of their price.

So far, Blend has made 1,338 loans worth a total of 13,842 Ether, or about US$26 million, according to tracker Dune. In today’s NFT market, the impact has been huge. NFT sales fell nearly 19 per cent to US$1.4 billion in April, according to tracker DappRadar, but in the last seven days, there have been 30 per cent more sales.

“Having the chance to buy a Punk for 10 ETH with a 0.5 per cent interest rate might sound too enticing for people waiting way too long to ape in,” said Pedro Herrera, head of research at DappRadar, referring to Blend. “At the same time, it is super important to spread caution.”

NFTs were once one of the hottest tokens around, with celebrities like Paris Hilton creating collections and Justin Bieber buying the digital images. But when all cryptocurrencies tanked in late 2021, NFTs fell too. However, unlike Bitcoin, which has rallied around 70 per cent so far this year, NFTs have not recovered.

Last month, trading volume on NFT marketplace OpenSea was the lowest it’s been since June 2021, according to Dune. Over the last two weeks of April, only about 80,000 NFT wallets were active per week, as compared with the nearly 150,000 per week typically, according to Gauthier Zuppinger, co-founder of tracker NonFungible.com.

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Last month, about 84 per cent of NFT trading volume came from Blur, thanks to its zero fees and native token, according to DappRadar. The number of total NFT sales fell about 10 per cent, the researcher said.

Despite the lift that Blend has given to the market, pricing pressure continues. Average sales price of Bored Ape Yacht Club is down 5 per cent in the last 30 days, for example, according to tracker NFT Price Floor. Popular CryptoPunks’ average price is down nearly 7 per cent in the same period, while the collection’s number of sales is down 40 per cent, per the tracker.

“Market sentiment shows that we are experiencing capitulation, but I anticipate a recovery within 12 months,” said Daniel Maegaard, a big NFT trader.

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While it’s unclear if NFTs reached their 2023 low, the market will not repeat the skyrocketing growth of 2021, said Zuppinger.  

“It will probably take a long time before we see such dynamics at work again,” he added.

One major problem is many NFT projects have simply failed to find new ways to make money for their users or engage with their communities, Lorenzo Melendez, president of NFT project Pudgy Penguins, said in an interview.

“The system had a lot of excess money in it,” Melendez said. “When push comes to shove and people need money to pay rent, people are going to liquidate their NFTs.” BLOOMBERG