NFT Lending Volume Crashes 97% as Sector ‘Matures’, says DappRadar

The non-fungible token (NFT) lending market is present process a collapse in quantity and consumer exercise.

Blockchain analytics platform DappRadar launched a report on Could 27 exhibiting that the NFT lending market dropped from almost $1 billion in month-to-month quantity to simply over $50 million in Could 2025, tumbling by 97% from its January 2024 peak.

NFT Lending Declines for Good Causes

DappRadar analyst Sara Gherghelas instructed Cryptonews that NFT lending permits customers to borrow cryptocurrencies like ETH through the use of NFTs as collateral. This was seen as a approach to convey extra monetary utility to digital property by giving holders entry to liquidity without having to promote their NFTs.

Sadly, the NFT lending market is witnessing a steep decline, which Gherghelas believes is because of three important elements.

“First, this shows the end of speculative incentives. Much of the early activity was driven by airdrops and farming, especially on platforms like Blur. As those incentives dried up, so did the volume,” Gherghelas stated.

Moreover, Gherghelas famous that falling NFT costs have led to a wave of liquidations. This has additionally resulted in dozens of NFT lending protocols changing into inactive, leaving just a few key gamers.

A Nearer Have a look at the NFT Lending Market

A kind of key gamers is NFTfi, an NFT lending platform created in 2021. Aristide Bui, NFTfi CMO, instructed Cryptonews that whereas the sector is present process modifications, it’s necessary to think about the total image of the lending market.

“NFTfi pioneered NFT lending in 2021, when total outstanding debt was just $100,000,” Bui stated. “Today, the market is significantly more developed, with platforms like Blend, Gondi, and others contributing to a current total outstanding debt of around $82 million.”

Bui added that at its peak in March 2024, the lending market reached $175 million in excellent debt, greater than double as we speak’s determine. In response to CoinMarketCap, the present complete market cap for Ethereum-based NFTs is roughly $7 billion.

“With $78 million currently in outstanding debt, that’s just over 1%—this is extremely low when compared to mature sectors like real estate, where debt can represent 20%–25% of the market. This suggests there’s still substantial room for growth and penetration,” Bui stated.

NFT Lending Matures

This seems to be the case, as Gherghelas believes that NFT lending is much from useless, however fairly maturing.

“The entire sector is shifting from a speculative hype cycle into a niche used mostly by experienced collectors and DeFi-native users,” she stated.

For instance, the NFT lending area seems to be maturing by a transparent shift away from hypothesis and into extra utility-driven use instances.

Gherghelas identified that the sector is presently seeing a desire for long-term holds and brand-based collections like Pudgy Penguins or CryptoPunks as collateral.

There has additionally been an increase in using Artwork NFTs like Fidenzas and Autoglyphs on lending platforms like Gondi, indicating a shift towards cultural worth and provenance.

Max Giammario, CEO of NFT and AI platform Kindred, instructed Cryptonews that these elements show that the NFT lending sector isn’t declining. Relatively, it’s experiencing a crucial liquidity crunch that’s forcing a elementary recalibration.

“Volumes have dropped significantly from peak levels, but this just reflects the collapse of speculative collateral values rather than a lack of underlying demand,” he stated.

Giammario elaborated that almost all NFT lending platforms constructed their fashions round risky, illiquid NFTs as collateral. In flip, this created an inherently fragile system.

“This correction is clearing out unsustainable practices and opening space for more robust risk models and stable collateral types to emerge,” he added.

Tokenized RWAs Enter NFT Lending Sector

As an illustration, Gherghelas believes that tokenized real-world property (RWAs) may present extra secure, lower-risk collateral, fixing the volatility concern that’s lengthy plagued NFT lending.

“With RWAs like real estate shares or invoice-backed tokens, lenders gain predictability and stronger incentive to participate,” she commented.

That is already beginning to materialize by early integrations and infrastructure growth. Gherghelas identified that initiatives like RealtyX—an RWA platform for actual property—and Courtyard—a blockchain-powered platform that transforms bodily collectibles into digital property—are laying the groundwork.

“If these assets are wrapped into NFT standards, they could make NFT lending more attractive to institutional users,” she stated.

Yat Siu, co-founder and government chairman of Animoca Manufacturers, instructed Cryptonews that tokenized RWAs are certainly a robust use case for NFTs and can be utilized as collateral.

Siu defined that tokenized RWA NFTs can be utilized for varied property (together with actual property) for which the collateral quantity is adequate for lending.

“The tokenization of my Stradivarius violin is one of the few examples of collateralizing an RWA NFT,” Siu commented. “I expect this field to grow as major institutions such as Galaxy provide lending on the basis of NFTs, but it will require more institutional backing and better credit market development (something that is generally non-existent in crypto, for now).”

NFT Lending Market Nonetheless Wants To Develop

Given the necessity for extra institutional curiosity in NFT lending, the market stays restricted. Nonetheless, Siu is assured that the sector will advance for a variety of causes.

As an illustration, Siu expects that there will probably be a revival of public curiosity in NFTs general.

“As the crypto market improves and wealth is created, the demand for NFTs will also increase, because NFTs represent the cultural, social, and symbolic status items of our modern digital life,” he said.

Siu additional identified that institutional adoption is all the time a late entrant, nevertheless it’s develop into obvious that there’s sturdy curiosity out there for fungible tokens.

“This will also lead to greater interest in NFTs. Institutional backing used to be almost exclusively about ‘money, stocks and assets’ but then branched out into adjacent assets like art and collectibles,” Siu stated.

Moreover, Bui famous that NFT lending continues to be in its early innings. As volatility decreases and real-world use instances increase, he believes lending will probably be one of many key pillars that convey sustainability and monetary utility to the NFT ecosystem.

He added that the NFT lending sector will develop alongside the restoration of the NFT market, which he believes is inevitable.

“Lending introduces a yield component that makes long-term value creation possible, particularly for lenders,” Bui stated. “At NFTfi, we see the market maturing and are tailoring our product to meet the needs of more advanced participants—like institutional funds and large-scale borrowers—rather than casual users.”

The publish NFT Lending Volume Crashes 97% as Sector ‘Matures’, says DappRadar appeared first on Cryptonews.