These days, one of the most common complaints about NFTs is that they can’t really be used for anything.
Well, one investor has proved everyone wrong by successfully using his NFTs as collateral for an $8-million loan.
This is reported to be the largest-ever NFT-backed loan in history, and it may signal that NFTs really do have utility. The only question is why this investor actually obtained the loan in the first place. Did he do it just to purchase more NFTs?
MetaStreet Says the Investor is a “Whale”
The loan was facilitated by MetaStreet – a relatively new player in the NFT game. The startup was co-founded by Conor Moore, operating on the lending platform NFTfi. According to this organization, this record-breaking $8-million loan has an APR of 10%, and it will need to be paid off within just 30 days.
Moore has referred to the borrower as a “whale,” but he didn’t disclose the identity of this major crypto holder. However, he did reveal that this investor holds a large collection of over 100 CryptoPunk NFTs. These are some of the most popular and sought-after NFTs on the market today.
Previously, MetaStreet’s largest-ever loan of this type was for $1.42 million, and that was collateralized by an Autoglyph. This new loan completely shatters that record and signals the coming of a new trend within the NFT lending market.
Could NFT Loans Become the New Normal?
In the future, MetaStreet and similar organizations may continue to issue loans of this type, breaking new records and moving towards a new era of peer-to-peer lending that is secured by digital collectibles.
The metaverse could easily accelerate this trend once it gathers steam. After all, people regularly use their homes as collateral when securing loans. Could people use their digital homes as collateral in the future one day? Maybe.
In fact, Conor Moore says that there are already similarities between his organization and Fannie Mae. He explained:
“It’s sort of like how Fannie Mae works in the US housing market. You’ve got a big aggregation vehicle through which originators can sell loans that then get batched up and split into different tranches. Those different tranches allow for more optimal capital efficiency.”
A New Use for NFTs?
Those who own NFTs often worry about these digital assets accumulating what MetaStreet CEO David Choi refers to as “virtual dust.” After all, the best investments are those that provide something of value.
For example, a home provides you with a place to live. So why shouldn’t an NFT also provide you with utility in the form of collateral?
Choi also suggested that this strategy can increase the purchasing power of the entire industry, implying that investors may simply use their NFTs as collateral to finance more NFT purchases.