The lending market for non-fungible tokens (NFTs) has witnessed an unprecedented surge, hitting a quarterly high of $2.13 billion in Q1, marking a significant 43.6% quarter-over-quarter growth.

According to data from CoinGecko, five of the six top platforms are seeing increased volumes.

Blend Dominates with 92.9% Market Share

In January, the NFT lending market hit a record $0.9 billion monthly volume, exceeding the previous peak of $0.85 billion in June 2023. Blend emerged as the top NFT lending platform, with a 92.9% market share and a monthly lending volume of $562.33 million in March 2024.

Since its launch in May 2023, Blend has consistently dominated the market, with its monthly share ranging from 88.8% to 96.5%. In Q1 2024, Blend’s lending volume surged by 49.2% quarter-on-quarter to reach $2.02 billion.

Arcade and NFTfi followed as the next most popular platforms, holding 2.8% and 2.2% market share, respectively, with lending volumes of $16.94 million and $13.32 million in March 2024.

Arcade recorded a new quarterly high of $39.46 million in Q1 2024, marking a 37.1% increase quarter-on-quarter, while NFTfi saw a 48.3% rise in lending volume to reach $35.88 million.

The remaining platforms, including X2Y2, BendDAO, and Parallel Finance, held smaller market shares ranging from 0.5% to 0.8%.

Incentives and Bitcoin Ordinals Influence

To drive more user interaction, NFT lending platforms are introducing fresh incentives to stimulate trading activities. In a recent move, Arcade, backed by Pantera Capital, introduced its “Clash of Clans” airdrop program in late February.

The initiative aims to distribute ARCD tokens to 4,000 wallets, each entitled to claim 750 ARCD tokens. Similarly, other platforms like X2Y2 and BendDAO have also initiated token launches for their community members.

Looking ahead, CoinGecko stated that the impact of increasingly popular Bitcoin Ordinals on the NFT lending market is a trend worth monitoring. While Ethereum NFT collections currently dominate loan originations, the evolving landscape may see a shift in dynamics.

Blend, established in May 2023, operates on a peer-to-peer lending model. It enables borrowers to use their NFTs as collateral while seeking lenders offering competitive interest rates.

Although the loans feature fixed interest rates, they do not have expiration dates. This flexibility allows borrowers to repay at their convenience, while lenders can exit their positions by auctioning off the collateralized NFTs through a Dutch auction mechanism.