Genesis Global Capital has issued its first wholly NFT-backed loan in the amount of $6 million. The loan was granted to Meta4 Capital, a Web3 focused investment management firm based in Miami. The firm is specialized in acquiring historically significant and rare NFTs.
The loan is making headlines given both its size and its use of NFTs as collateral rather than broader liquid collateral.
Meta4 used the new funds to complete its purchase of three NFTs from Sotheby’s Metaverse “Natively Digital” October NFT auction. The three NFTs included the $3.4 million record-setting gold Bored Ape Yacht Club #8817, the $3.6 million Rare Pepe PEPENOPOULOS, and a $1.5 million NFT from Fingerprint DAO’s Mitchell F. Chan.
The new acquisitions served as a bridge to Meta4’s Series B round. That round closed on Dec. 1 for an unknown amount, and each of the new items was split proportionally among the Meta4 investors.
Brandon Buchanan is the CEO and co-founder of Meta4 Capital.
“We're able to financially engineer returns above the interest rate for our investors by purchasing additional NFTs or earning yield through DeFi protocols, and we're able to put NFTs that would otherwise be essentially static to work.”
Buchanan also says that NFT-backed loans are a better way of managing risk on the underlying asset.
“NFTs that would otherwise be in a mostly static state are now being put to work and we’re able to financially engineer returns in excess of the interest rate for our investors either by buying additional NFTs or earning yield through DeFi protocols,” Buchanan says.
Roshun Patel is Genesis’ VP of Institutional Lending.
According to Patel, the company is taking “blue chip” NFTs.
“We’re looking for the most liquid NFTs with the highest individual value. Only a few CryptoPunks and Bored Apes, as well as a few Pak and Nouns NFTs, currently fit within that group,” Patel said.
The use of NFTs as unique collateral is a growing trend, and the new developments from Genesis and Meta4 will go a long way in building up this ecosystem.