The NFT lending sector has experienced a dramatic downturn, with transaction volumes dropping by 95% compared to the peak levels observed in January 2024.
A recent report from DappRadar reveals that the NFT lending market declined sharply, falling from approximately $1 billion in January 2024 to merely $50 million by May 2025.
The decline is largely attributed to a significant drop in participation: borrower numbers have fallen by 90%, decreasing from over 20,000 to just 2,049, while lender figures have dropped 78%, falling from 3,700 to 828 during the same timeframe.
The typical loan size has also seen a sharp decline, decreasing from approximately $22,000 in January 2024 to around $4,000.
According to blockchain analyst Sara Gherghelas, the shift indicates that users are either leveraging lower-value assets or adopting a more cautious approach to borrowing. She explained that this trend reflects not merely reduced activity but also a decline in user confidence and diminished liquidity across NFT collections.
Plummeting Prices Shake NFT Market
Fundamentally, a significant issue stems from the considerable decline in the market value of non-fungible tokens (NFTs).
“With the value of collateral experiencing a sharp decline, lending activity has, as a result, diminished,” stated Gherghelas. “While a handful of platforms have managed to retain or recapture some momentum, they remain exceptions and haven’t been sufficient to revitalize the broader sector.”
Pudgy Penguins stands out among the few exceptions, accounting for 40% of all NFT-backed loans by originating $203 million in borrowing volume since the start of 2025.
“Their consistent floor value, growing intellectual property, and active community engagement have supported their reputation as a dependable liquidity source,” stated Gherghelas.
Azuki came in second, accumulating $85.4 million, while Bored Ape Yacht Club followed with $45.8 million.
GONDI Overtakes Blend as Leading NFT Lending Protocol
A notable shift has occurred as Blur’s Blend lending protocol saw its dominance shrink from 96% at the start of the year to merely 30%. Meanwhile, GONDI has emerged as the new frontrunner, capturing 54% of the market share.
The report attributed Blur’s decline in momentum to the reduction in airdrop rewards and a slowdown in the rapid trading activity that had previously driven its expansion.
“In contrast, steady growth has been observed in GONDI’s adoption since Q1 2025, as it appeals to users desiring a more structured lending framework,” said blockchain analyst Sara Gherghelas.
“The present condition of NFT lending paints a recognizable picture: transaction volume has declined, user engagement has plummeted, and speculative energy has faded,” noted Gherghelas. “This represents more than a temporary slowdown — it reflects a fundamental restructuring of the sector.”
In order to shift out of what she described as “survival mode,” Gherghelas emphasized that fresh catalysts must be introduced to revitalize the NFT lending sector.
Possible revitalization strategies include integrating NFTs backed by real-world assets (such as tokenized real estate or yield-generating instruments), improving user interfaces to “abstract borrowing complexity and align with user objectives,” and evolving from a straightforward peer-to-peer framework toward an advanced infrastructure featuring undercollateralized loans, credit scoring systems, and AI-driven risk matching.
“NFT lending has not ended — it is undergoing transformation,” stated Gherghelas. “The speculative frenzy has dissipated, short-term traders have exited, and what’s left behind is a more subdued, yet possibly sturdier foundation. If the upcoming phase focuses on functionality, cultural relevance, and improved infrastructure, there’s a chance for NFT lending to regain momentum — this time with a more enduring framework.”
