- August 22, 2022
NFT: Is the mass liquidation of the Bored Ape Yacht Club coming?
It became known that several Bored Apes and Mutant Apes NFT owners lent NFTs on the BendDAO against Ethereum. Therefore, there are increasing fears of a liquidation cascade.
The news about the possible liquidation cascade spread when a Twitter user shared the screenshot about the auction of a Bored Ape NFT.
The floor Price (“Reserve Price”) of the Bored Ape BAYC #533 is currently at 72 ETH. The NFT was previously used as collateral for a crypto loan in the amount of 66.95 ETH and will therefore be auctioned.
At the time of publication of the article, there were still no bids for the NFT. However, it looks as if several Bored Ape NFT holders also took out a loan of around 60 ETH for digital monkeys.
BendDAO is one of the most popular peer-to-peer NFTFi protocols. With this protocol, users can borrow ETH at the minimum price of the NFTs. As a rule, NFT holders receive up to 40% of the minimum price as a loan.
The total value of the NFTs deposited with Benddao as collateral is over $ 59 million. A total of 272 BAYC-NFTs, i.e. 2.8% of the collection, are deposited on the Platform as collateral. In addition, there are 1.6% of the Mutant Apes collection on the platform.
The BendDAO uses the so-called ”health factor” (HF) to assess the liquidation risk. 45% of the BAYCs are in the “danger zone”, i.e. the HF is less than 1.2. With an HF of 1, there is likely to be a forced auction of the affected NFTs.
Liquidation Could push NFT reserve Price Further
If there are further auctions of the BAYC NFTs, the minimum prices of the other NFTs may continue to fall. A liquidation cascade on the NFT market could be the consequence.
Many members of the crypto community even compared the scenario with the bankruptcy of Celsius or the crash of Voyager Capital. So far, there have only been a few mutant Ape foreclosures. However, if the NFT owners do not repay the loans, further foreclosures could follow.
BendDAO co-founder is on the verge of liquidation
Ironically, one of the co-founders of the BendDAO is himself a Bored Ape NFT owner and is on the verge of a foreclosure sale.
Another apeowner, with the nickname Franklin, also caused a stir. Franklin borrow get 10,000 ETH for 60 Bored Apes. Although many were concerned that the liquidation of these NFTs could have a domino effect on the market, did Franklin clarify that he is already repaying the loan hat.
Nevertheless, fears of a possible wave of liquidation remain. On Twitter, many users compare the scenario with the crash of the crypto platforms Celsius and Voyager.
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