Institutional Lenders Enter NFTFi

Pat Doyle
6 min readDec 6, 2023


INDIGO Fund is a web3-first fund striving to accelerate the marketability and use cases of viable projects while building infrastructure to access credit markets in the Web3/NFT ecosystems. All their efforts come back to investors in the form of yield. This report will review a comprehensive analysis of the lending activity of INDIGO on NFTfi.

These metrics can provide insights into the lender’s risk management, liquidity, and overall success in the NFT lending market.

Before we dive into metrics, let’s take a look at their activity in the market. INDIGO has issued 411 total loans with a USD Value of $10,868,184.50 across 19 different NFT collections.

The table below shows the breakdown of total loan volume by USD value. You can see that most loan originations were blue-chip collections, and over 90% of their loan volume (in USD terms) was loaned on CryptoPunks.

INDIGO has focused on core crypto-native PFP communities, with a lower proportional amount of lending activity across other NFT categories such as generative art, digital land, or traditional digital art.

INDIGO has deployed most of its loans to CryptoPunks in USD. For this write-up — we will focus on the performance of their CryptoPunk loans.

Loan-To-Value and Volume

To understand the risk of each loan, we need to understand the Loan-To-Value (LTV). Now, in a decentralized peer-to-peer market, loans will always be overcollateralized. For instance, if your NFT is worth 10 Ethereum (ETH), you may only be able to borrow 5 ETH against it. Overcollaterizing the loans protects the lender in case the value of the NFT drops or if the borrower fails to repay the loan. NFTs can be very volatile in value, much more than traditional assets. By requiring over-collateralization, lenders reduce the risk of losing money if the NFT’s value falls or the borrower defaults. When the borrower repays the loan and any agreed-upon interest, they get their NFT back. If they fail to repay, the lender keeps or sells the NFT to recover their funds. In this way, NFT ledning protocols such as NFTfi enable NFT owners to obtain liquidity on their assets, without the need to sell them. However, it also carries risks, mainly due to the volatility of NFT values. If the value of the NFT drops significantly, the borrower might end up owing more than the NFT is worth.

We begin by analyzing the historical sales of CryptoPunks and comparing it to the loan value on the day the loan was initiated.

In examining the portfolio of the 199 CryptoPunk loans, it’s evident that INDIGO has maintained an average LTV ratio of 55%. This LTV ratio indicates the risk profile and collateralization strategy of INDIGO’s lending operations. A 55% LTV implies that, on average, the loan amount represents only 55% of the total appraised value of each CryptoPunk.

From a financial risk management perspective, this LTV ratio demonstrates a conservative approach, ensuring a substantial buffer against the volatility and potential depreciation in the NFT market. By maintaining the loan value at just over half of the underlying asset’s value, INDIGO positions itself to have a lower risk exposure. In the event of a loan default, the higher collateral value relative to the loan amount enhances the likelihood of asset recovery without significant loss. This strategy mitigates potential losses due to market fluctuations and reflects a disciplined risk assessment framework in the volatile and emerging market of NFTs.


The data presented reveals that INDIGO has committed $9,753,695 in financing the CryptoPunk market, with the average loan amounting to $49,000 per punk. A critical element of INDIGO’s lending strategy is its exclusive reliance on stablecoin DAI to facilitate these loans. This decision is particularly astute from a financial risk management standpoint. By opting for DAI over ETH/WETH as the loan currency, INDIGO effectively hedges against the currency risk commonly associated with the high volatility of cryptocurrencies. As a result, when these loans mature, the interest earned is in a stablecoin form, which enhances the stability of INDIGO’s returns and insulates the portfolio from the price swings typical of more volatile digital currencies like ETH. This approach highlights INDIGO’s conservative, stability-oriented strategy, focusing on risk-adjusted returns and capital preservation in the volatile cryptocurrency market.

Regarding the annual percentage rate (APR) on CryptoPunk loans, the average observed is 11%. However, this rate could increase due to the fixed nature of the repayment amount in the loan terms. For instance, if a 35-day loan of $47,000 on a CryptoPunk with an 11% APR is repaid in 20 days, the effective APR would escalate to approximately 19%.

The loan term distribution for INDIGO’s CryptoPunk loans shows an average duration of 37 days, with some loans extending to 90 days.

In terms of USD, INDIGO has realized a total return of $107,865 from its CryptoPunk loan portfolio, averaging $540 per loan. This translates to an average daily return of $14 per loan in DAI, further emphasizing the fund’s effective yield management in a fluctuating market environment.

Risk and Liquidity

In decentralized peer-to-peer lending, INDIGO has demonstrated prudent risk management by maintaining an optimal LTV ratio across its loan portfolio. This disciplined approach to LTV management positions INDIGO favorably in terms of risk mitigation, enhancing its capacity to recover not only the principal amount but potentially more in the event of a default. This strategic LTV calibration underscores INDIGO’s commitment to maintaining a robust risk profile within its lending operations.

Furthermore, it’s important to note the liquidity dynamics in the NFT market, which differ significantly from those in the ERC20 token space. While NFTs inherently lack the high liquidity characteristic of ERC20 tokens, leading collections such as CryptoPunks often exhibit relatively strong liquidity options. Liquidity pools dedicated to NFTs, such as NFTX, and the presence of standing bids on marketplaces like OpenSea or Blur, typically offer avenues for immediate liquidity. However, it’s noteworthy that these liquidity options usually transact at values marginally lower than the floor price, a factor that INDIGO likely considers in its liquidity risk assessment and portfolio strategy.


In the NFTFi lending landscape, INDIGO has become a pivotal entity. The fund has adeptly maintained a robust LTV ratio, indicative of sound risk management practices.

A key strategic advantage for INDIGO lies in its focus on lending against established ‘blue-chip’ NFT collections, such as CryptoPunks. This approach significantly mitigates execution risk, a prevalent concern in the NFT domain. Unlike many emerging NFT projects, which often hinge on speculative roadmaps, utility promises, and anticipated future value — elements that typically introduce complex challenges over time — CryptoPunks derive their value intrinsically from their status as art. Their inherent value proposition does not rely on external factors or developmental milestones. This characteristic of CryptoPunks not only simplifies the value assessment but also provides a substantial buffer against the execution risks that are commonly associated with more speculative NFT projects.

In essence, INDIGO’s strategic lending practices, coupled with its focus on high-caliber, low-execution-risk NFT assets like CryptoPunks, position it as a prudent and forward-thinking institutional player in the NFTFi sector.



Pat Doyle

Building actionable blockchain analytics. Co-Founder @ Genesis Volatility