Blue chip collaterals help stabilize NFT lending: Paraspace
According to a recent report published by nonfungible token (NFT) money market protocol Paraspace and multichain wallet BitKeep, the current amount of NFT borrowing and lending, or NFTFi loans, has surpassed $430 million across 43,521 borrowers. The highest proportion of collateral comprised the most popular NFT collections, such as Wrapped CryptoPunks, Bored Ape Yacht Club and Mutant Ape Yacht Club.
Researchers at Paraspace and BitKeep said that NFTFi added $25 million in outstanding loans from January to March. Also contributing was the introduction of a digital collectible lending protocol by NFT marketplace Blur, which surpassed $16 million in loans one day after its launch, led by Taiwanese celebrity Machi Big Brother. Yet, the real impetus was the invention of Bitcoin Ordinals, which boosted total NFT market transaction volume to $1.5 billion in March but shrunk to $330 million in May. Despite the growth, however, Paraspace and BitKeep researchers warned that liquidity concerns remain a constant theme in the sector:
In a statement to Cointelegraph, Paraspace NFT developers explained that despite accumulating NFT loans of over $280 million, the protocol had just 16 NFT liquidations with no bad debt since it began operations last year. Developers say the protocol owes its success to rules allowing only the most-established and highly liquid, or blue chip NFTs, to be pledged as collateral. The entry threshold for blue chip NFTs is often very high, with an average price range between $11,000 to $120,000.
Nevertheless, developers at both Paraspace and BitKeep cautioned that the NFTs are a new market “lacking historical data and universally recognized valuation analysis methods, resulting in pricing difficulties." As a
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