Ordinals Lending Market Heats Up on Ethereum

Last Thursday, Cirrus, an NFT trader and founder of the ArcadeXYZ lending platform, provided the largest loan to date against a Bitcoin Ordinal from one of the top Ordinals collections, Nodemonkes.

The 25 ETH loan, equivalent to roughly $80,000 at the time, was processed through Ethereum-based ArcadeXYZ. The Ordinal in question, a rare Nodemonke, has been wrapped into an Emblem Vault, an Ethereum-based NFT that can host assets from other chains such as Bitcoin. The 60-day loan carries a 55% annualized interest rate.

The borrower likely chose to leverage the Ordinal using existing NFT-Fi infrastructure on Ethereum due to the wide gap in loan quotes across networks.

At the time, the best terms available on the Bitcoin network were 0.4 BTC, roughly $25,000 USD, for 16 days at 90% APR. By wrapping the Ordinal, the borrower was able to save substantially on interest and also secure a longer-term and a substantially larger loan.

Lending on the Bitcoin network is still in its infancy, considering that the Ordinals protocol is just over a year old. Platforms such as Liquidium have been the main lending hub for Ordinals, but the order books for lending and borrowing are still rather shallow. This low liquidity results in a less competitive marketplace and, therefore, less favorable rates for borrowers.

However, as Ordinals, BRC-20s, and eventually Runes continue to increase in price, the demand for lending services is likely to increase as investors seek liquidity and flexibility while retaining their assets. An increase in demand and volume in the lending markets would lead to a much more competitive and favorable environment for borrowers.

Cirrus did not respond to The Defiant’s request for comment on the loan but went on to highlight that NFT lending is one of the best forms of yield available in DeFi.