Genesis Global Capital confirmed that it has completed one of its first purely nonfungible token (NFT)-backed loans for around $6 million to a Miami-based Web3-focused investment management company, Meta4 Capital.
The loan is conspicuous due to its amount and the fact that it is solely using nonfungible tokens (NFTs) as collateral instead of including majorly liquid collateral. Meta4 works as an NFT VC backed by Andreessen Horowitz, specializing in purchasing presumed rare and historically significant nonfungible tokens.
Institutional investors are now entering the NFT space, mainly interested in offering original lending solutions. The funds from Genesis’ loan were used to finalize Meta4’s purchase of the three NFTs that formed part of the Sotheby’s Metaverse “Natively Digital” October nonfungible token auction: the Rare Pepe PEPENOPOULOS for $3.6 million, the $3.4 million record-setting gold Bored Ape Yacht Club #8817, and an NFT from FingerprintDAO’s Mitchell F. Chan for around $1.5 million.
These purchases worked as bridge capital until Meta4 closed a Series B round on December 1, 2021, for an undisclosed amount. All of the Meta4 investors got a proportional share of every item procured. Meta4 Capital’s CEO and co-founder, Brandon Buchanan, said that the NFT-backed loans offer a better way of managing risk on the underlying asset, normally Ether (ETH).
“NFTs that would otherwise be in a mostly static state is now being put to work and we’re able to financially engineer returns above the interest rate for our investors either by buying additional NFTs or earning yield through DeFi protocols.”
Buchanan also insisted on his “thrill” to be partnering with a major brokerage like Genesis, which offers “credence” and value to nonfungible tokens and NFT-backed lending. Roshun Patel, Genesis’ vice president of institutional lending, said that the firm is now accepting what is considered as “blue chip” NFTs currently. He stated:
“We’re looking at the most liquid, high individual value NFTs. Right now, only a few CryptoPunks and Bored Apes fit into that category, as well as select Pak and Nouns NFTs.”
In that context, NFT is a novel form of collateral that is being championed by crypto native firms and protocols. The loan between Meta4 Capital and Genesis also underpins the growth of financial products for the institutional investors in the NFT asset class.