NFT Lending Market Crashes 97% from $1B Peak

The NFT lending sector has experienced a devastating collapse that reflects the broader downturn in digital collectibles markets, with monthly lending volumes crashing from a peak of $1 billion in January 2024 to just $50 million in May 2025. According to DappRadar’s latest research, this 97% decline coincides with equally dramatic drops in market participation, including a 90% decrease in active borrowers and a 78% reduction in lenders over the past year. The sharp contraction suggests that the NFT lending narrative has lost its appeal among users, particularly as market conditions have deteriorated and confidence in digital asset collateral has waned.

The structural changes in the lending market extend beyond volume metrics to fundamental shifts in lending behavior and risk appetite. Average loan sizes have contracted significantly from their 2022 peak of $22,000 to approximately $4,000 currently, representing a 71% year-over-year decline that indicates both reduced demand for leverage and increased caution among lenders. This conservative approach reflects the broader uncertainty surrounding NFT valuations and the challenges of accurately pricing volatile digital assets as collateral for lending purposes.

Market consolidation has reshaped the competitive landscape, with previously dominant platforms losing significant market share as overall activity contracts. Blur’s Blend protocol, which once commanded over 90% of the NFT lending market, now accounts for just 30% of outstanding loans, while smaller platforms like NFTfi and Arcade continue operating with substantially reduced activity levels. Notably, Pudgy Penguins remains one of the few collections maintaining strong lending activity with $203 million in loans this year, highlighting how market activity has concentrated around a small number of premium assets.

The lending market collapse mirrors broader challenges facing the NFT ecosystem, with weekly trading volumes declining consistently and dragging the market back to levels not seen since its 2020 emergence. DappRadar analyst Sara Gherghelas characterized 2024 as “one of the worst-performing years since 2020,” with trading volumes falling nearly 20% year-over-year and total sales declining 18%. This comprehensive market contraction has created a challenging environment where reduced liquidity, declining asset values, and risk aversion have combined to fundamentally alter the NFT lending landscape, leaving participants questioning whether the sector can recover to its previous heights.

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