North American cryptocurrency exchange Kraken will offer NFT-backed loans next year, underlining that non-fungible tokens are the new asset. In a statement made just over a week ago, Jesse Powell, founder and CEO of the Kraken exchange, predicted something of a great hibernation for cryptocurrencies by 2022.
How to apply for a loan of up to $ 1 million using an NFT as collateral
Kraken and loans with NFT
It signaled a bitcoin crash, as well as a sell off of Ethereum, Cardano, Solana, BNB, and XRP. Incidentally, a collapse of the US dollar. Justifying this last statement in uncontrolled inflation. Now it is not a question of predictions but of firm intentions. In a new interview in Bloomberg News, Powell noted that Kraken has planned for the year that it is about to begin offering loans backed by the guarantee of NFTs.
The collateralization of loans with NFTs had already been launched by DeFi platforms such as Nexo and Arcade. The latter, which takes its name from the popular video game line, has recently launched the “wrapped NFTs” or wrapped NFTs, which is a grouping of various NFT assets for the acquisition of large loans. In Nexo, focused on opening lines of credit to obtain fiat currencies or stablecoins using deposited cryptocurrencies as collateral, it introduced what it calls the OTC Service to also do so with collections of NFTs. Specifically, it currently offers it with Bored Ape Yacht Club and CriptoPunks.
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The biggest loan with an NFT
In addition, there are platforms such as NFTfi specialized in granting loans with NFT. In fact, on October 28 this company issued the largest loan to date, depositing an NFT as collateral. A user, hidden under the pseudonym KrypToniK, left as collateral an NFT belonging to the Autoglyphs collection, for which he received a total of $ 1.4 million in the DAI stablecoin.
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With plans like Kraken’s, the NFT market is given a further push. It is to recognize them as patrimony of full right. It is not only possible to have them and speculate with them until the price they acquire is more convenient for us, but, by becoming a guarantee, they will allow obtaining liquidity, without the need to liquidate them, to dispose of them. It is to give a new functionality to the NFTs: beyond speculation, beyond the ostentatious consumption of art or beyond the support of artists, following Powell’s own words to the North American medium.
Articulate trust in NFTs
As in any loan with guarantees, one of the fundamental challenges is to determine the value of the asset that serves as collateral. Especially in a market as fluctuating as that of NFTs. But it is also true that, at least in the more consolidated collections, base prices are being set that tend to a certain stability and, what is more important for the lending entity, with a sustained revaluation.
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Powell did not indicate in his interview which specific collections of NFTs will initially be supported by Kraken to serve as collateral. Now, comparing his previous and most recent statements, it seems clear that his company is betting more on the value of NFTs, than on that of some fiat currencies, which drags down certain stablecoins. The question is how to articulate the current confidence in NFTs with the relative confidence in the value of cryptocurrencies. It seems that, from the point of view of confidence in its evolution, the idea of a certain disconnection is dropped. But all this will tell us in 2022, which is just around the corner.
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