The once-booming NFT lending market is now in deep decline, with transaction volumes plummeting by 97% from January 2024’s $1 billion peak to just $50 million in May 2025, according to a new report by blockchain analytics platform DappRadar.
The report, authored by analyst Sara Gherghelas and published on May 27, paints a stark picture of a sector in survival mode. While the core infrastructure of NFT lending platforms remains intact, overall user and lender activity has collapsed, with borrower numbers down 90% and lenders decreasing by 78% since January 2024.
According to Gherghelas, the NFT lending ecosystem needs fresh momentum to escape stagnation—and one potential catalyst could be the integration of real-world assets (RWAs) with NFTs. She suggests that tokenized real estate and yield-bearing instruments could serve as more stable and trustworthy forms of collateral, reviving confidence in NFT-backed loans.
DappRadar’s data shows that the average NFT loan size has fallen dramatically—from $22,000 in 2022 to just $4,000 as of May 2025, reflecting either a shift toward lower-value collateral or more conservative borrowing behavior. Meanwhile, loan durations have shortened from an average of 40 days in 2023 to around 31 days this year, suggesting more frequent but shorter-term liquidity plays.
Part of the downturn is tied to the broader collapse in NFT market activity. Trading volumes for NFTs dropped 61% year-over-year in Q1 2025, from $4.1 billion to $1.5 billion. With collateral values plunging, the appeal and viability of NFT lending have naturally followed suit.
The report also highlights the shrinking number of players in the space. Only eight lending protocols currently command any significant market share, underscoring the consolidation taking place amid the downturn.
Still, Gherghelas maintains that all hope is not lost. She argues that innovation around lending models—such as introducing undercollateralized loans, credit scoring systems, and AI-powered risk assessments—could pave the way for a more resilient sector.
According to a different DappRadar’s Industry Report, NFT trading has sharply declined since December 2024, while AI-powered dApps have emerged as the fastest-growing sector in Web3.
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