NFT Lending Implodes as Market Shrinks
NFT lending, once a thriving niche within the broader non-fungible token craze, has imploded in recent months. NFT lending volumes fell to just $50 million in May 2025—a 97% decline from the monthly peak of $1 billion in January 2024, according to DappRadar. The steep decline points to collapsing demand and vanishing confidence in NFT-collateralized loan products.
Borrowers and Lenders Leave in Droves
DappRadar’s report on May 27 revealed that active borrowers fell by 90% over the past year, while active lenders fell by 78%. The data suggests that the natural appeal of NFT lending has declined significantly.
The sharp decline shows that the NFT lending narrative is no longer convincing enough to users, at least not in the current market climate,” said Sara Gherghelas, blockchain analyst at DappRadar.
Several borrowers have likely been discouraged by falling NFT prices, while lenders appear to be pulling back on the basis of increased risk and reduced liquidity in the sector.
Loan Sizes Point to Market Conservatism
Also pointing to the downturn is the average loan size, which has fallen sharply. During the 2022 bull market, the average NFT-backed loan was around $22,000. Now, it’s around $4,000—a year-over-year drop of 71%. The shift signals decreased demand for leverage and a more conservative lending environment.
Pudgy Penguins Swim Against the Tide
Pudgy Penguins has been one of the bright spots in the industry amid the gloom. The NFT collection has volume-traded $203 million worth of loans in 2025 alone, according to DappRadar. At a time when most collections have been seeing precipitous declines, Pudgy Penguins’ consistent lending volume shows that brand strength and community backing still count for something.
Blur’s Blend Protocol Loses Its Grip
Blur’s Blend protocol, which was once the dominant force in NFT lending, has also lost its shine. From a market share of over 90% at its peak, Blend now controls just 30% of the outstanding NFT loans. There are other smaller platforms such as NFTfi and Arcade but with reduced user activity.
NFT Market at Large Faces Headwinds
The collapse in NFT lending is reflective of a broader downturn in the NFT market. Weekly trading volumes have been shrinking for months, and 2024 was marked as one of the worst years on record since the NFT market exploded in 2020. Overall trading volume declined by 20% from 2023, and overall NFT sales fell by 18%.
With no catalyst for recovery in the near term, the outlook for NFT lending—and the NFT market as a whole—remains cloudy.
