The NFT market is flatlining, the DeFi lending market has seen some big bankruptcies, and bitcoin has been dipping under $20,000 regularly for a month. Perfect time to start a buy now, pay later (BNPL) lending market for non-fungible token (NFT) collectibles.
Actually, crypto lender Teller’s new BNPL marketplace isn’t a big risk — for Teller — although its timing is about a year later than prime time in the market for high-end NFTs like CryptoPunks and Bored Ape Yacht Club avatars that have sold for six and even seven figures.
See also: NFT Series: NFTs Target Collectors Market With Avatars, Celebrities
That’s because Teller Finance, a decentralized finance (DeFi) lending protocol startup, is not issuing any NFT-backed loans itself.
While Teller’s main business is connecting borrowers with more traditional crypto lending liquidity pool that offer low- or no-collateral loans based on off-chain credit scores and other information, in the case of its “Ape Now, Pay Later” offering, it has built what amounts to an open order book BNPL lending market. Individual lenders are connected with would-be buyers of high-end NFT collectibles — limited to 10 “blue chip” NFT collections — who want to pay over time.
The BNPL terms begin with a 25% to 50% down payment, and then give buyers up to 90 days to pay off the loan and receive the NFT. If they default, the lender can seize the down payment and sell the NFT, with the would-be buyer getting any leftover funds after the sale.
However, if the NFT’s price tanks too badly, the lender is out of luck.
Nor does Teller set the terms of the loan: the lender and buyer set the terms, including repayment schedule and APR, which can run as high as 30%.
“Buying NFTs is one of the core things Web3 consumers want to do right now,” Ryan Berkun, founder and CEO of Teller Finance, told Decrypt. “Buy now, pay later is a no-brainer.”
No Brainer
While a number of other firms are investing in the NFT market — both GameStop and Reddit launched NFT marketplaces in the past weeks — Berkun’s opinion about NFT investment being a “no-brainer” is debatable.
For one thing, while Bored Ape Yacht Club (BAYC) NFTs are still bringing in high prices with a floor price — meaning the lowest price on offer for any bored ape, which vary widely based on rarity and other design features — they are still down almost 40% from their April all-time high. And collectible sales are far less frequent, dropping from a January high in the 40,000 to 50,000 daily range to 5,000 on Wednesday (July 13).
For another, the lending market in general is bracing for tough times.
While this certainly applies to crypto lending, where a second major insolvent lender, Celsius, joined Voyager Digital in bankruptcy on Wednesday, it is also happening in the broader market as banks and other financial institutions brace for a steep recession.
Read more: Crypto Lender Celsius Files for Chapter 11 Bankruptcy
JPMorgan Chase on Thursday (July 14) revealed that it has upped its reserves for loan defaults by $10.5 billion — an order of magnitude larger than the $900 million it set aside in April — despite cutting deeply into its earnings for Q2 2022, which stood at $4.7 billion in spite of higher-than-expected earnings.
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