Against the backdrop of a falling market for collectible fabrics, clients of the lender BendDAO, who pledged Bored Ape (BAYC) tokens, faced a problem that could negatively affect the entire NFT market.
Web3 DoubleStudio founder “DoubleQ” has warned that the BAYCs that holders have staked on BendDAO in exchange for ETH could be liquidated at a lending ratio of 1.01. There are currently 20 BAYCs on the market with loan ratios below 1.1 and even 1.2, which could lead to an NFT liquidation of around $55 million.
According to DoubleQ, this could cause the NFT market to crash. At the same time, the volume of the largest trading platform OpenSea is currently at its lowest level in the last 12 months. This means it won’t be enough to save BAYC from liquidation. Borrowers will have 48 hours to repay loans or their collateral will be liquidated.
“Short-term fluctuations in the NFT floor price are normal. The NFT consensus was not reached overnight, and it will not be destroyed in a short period of time.” claims BendDAO.
The majority of Bored Ape holders facing liquidation bought their NFTs a few months ago at a floor price of 125 ETH. Against the backdrop of a falling market, the price fell to a level just above 70 ETH. Collectors who have used their tokens as collateral must repay the loan plus interest in order to withdraw the NFT.
Part of the problem lies in the mechanics of NFT trading, where floor prices will adjust as the price of ETH fluctuates. Despite ETH rising from $1,000 to almost $2,000 in the last month, lenders like BendDAO are still denominated in their originally provided tokens. As a result, some BAYCs are being liquidated at higher prices than they were purchased.
As more expensive NFTs come on sale in the form of liquidation assets, collectors have begun buying collections at discounted prices. Auctioned NFTs on BendDAO must be bidding within 5% of the collection’s minimum price, no matter how attractive it may be.
Research agency Footprint Analytics recently reported that speculative and social sentiment in the non-fungible token market led to a 41% decline in NFT trading volume.
Source: Bits
I’m James Harper, a highly experienced and accomplished news writer for World Stock Market. I have been writing in the Politics section of the website for over five years, providing readers with up-to-date and insightful information about current events in politics. My work is widely read and respected by many industry professionals as well as laymen.
