The NFT lending market, once a bustling arena for digital asset enthusiasts, is now struggling to find its footing. According to a recent DappRadar report released on May 27, 2025, the sector has experienced a staggering 97% drop in volumes, plummeting from a peak of $1 billion in January 2024 to just $50 million this month. The cause of this downturn? A lack of compelling catalysts, says Sara Gherghelas, an analyst at DappRadar.
Real-World Assets: A Beacon of Hope?
Amidst this downturn, real-world asset NFTs—think tokenized real estate or yield-bearing securities—are emerging as potential saviors. “For NFT lending to move beyond survival mode, it needs new catalysts,” Gherghelas emphasized. These assets could provide more stable and trusted collateral sources, possibly reviving the flagging sector. But here’s the catch: 2025 has yet to offer a compelling reason for the market to bounce back. Infrastructure remains, platforms are active, yet activity has slowed significantly. This trend mirrors recent developments in the DeFi space, such as the Tokenized Apollo Credit Fund’s debut with a levered-yield strategy, which highlights the growing interest in real-world asset tokenization.
Borrower and lender enthusiasm has waned dramatically. Since January last year, borrower activity has nosedived by 90%, and the pool of willing lenders has shrunk by 78%. The average loan size has also taken a nosedive—from $22,000 in 2022 down to $4,000 in May 2025, marking a 71% drop. This shift suggests that users are either borrowing against lower-value assets or becoming more conservative with their leverage.
A Changing Landscape
The NFT market’s broader decline compounds this lending crisis. According to Gherghelas, the overall NFT market saw volumes drop 61% in the first quarter, from $4.1 billion last year to $1.5 billion now. With collateral values collapsing, lending activity naturally followed suit. While a few outliers have managed to hold or regain traction, they remain exceptions rather than the rule.
The market’s contraction has also led to a narrowing protocol landscape. Only eight protocols currently hold any significant market share, highlighting a shift from the “flip-for-liquidity” model that thrived in bull markets to a more cautious, risk-averse environment. “But that doesn’t mean NFT lending is finished,” Gherghelas noted. “Platforms are diversifying, use cases are shifting, and collateral preferences are changing.” This shift is echoed in large-scale tokenization deals, such as the world’s largest $3B RWA tokenization deal inked by MultiBank, MAG, and Mavryk, which underscores the potential for real-world assets to reshape the market.
Future Prospects and Challenges
Looking forward, the sector faces a critical juncture. Tools that simplify borrowing against NFTs, and protocols incorporating smart infrastructures like undercollateralized loans, credit scores, and AI-driven risk matching, could provide the necessary spark for recovery. Yet, the average loan duration has also shortened—from 40 days in 2023 to 31 days now—pointing to more frequent but shorter loans. This might indicate tactical liquidity plays, but it raises questions about whether these strategies can sustain long-term growth.
In a market built on speculation and rapid turnover, the current environment demands adaptability and innovation. “If the next wave builds on utility, culture, and better design, NFT lending might just find its second wind—one built to last,” Gherghelas concluded. Whether these changes will be enough to revitalize the sector remains to be seen, as the NFT lending market stands at a crossroads, searching for its next big catalyst in an ever-evolving digital landscape.
Source
This article is based on: Real-world assets could revitalize dying NFT lending market: DappRadar
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
