It has been revealed that several Bored Apes and Mutant Apes NFT owners have been lending NFTs on BendDAO against Ethereum. Therefore, there is increasing fear of a liquidation cascade.
News of the potential liquidation cascade broke when a Twitter user shared the screenshot of a Bored Ape NFT being auctioned off.
The floor price (“minimum price”) of Bored Ape BAYC #533 is currently 72 ETH. The NFT was previously used as collateral for a 66.95 ETH crypto loan and is therefore being auctioned off.
At the time the article was published, there were no bids for the NFT. However, it appears that several Bored Ape NFT holders have also taken out a loan of around 60 ETH to digital monkeys.
BendDAO is one of the most popular peer-to-peer NFTFi protocols. With this protocol, users can borrow ETH against the floor price of the NFTs. Typically, NFT holders receive up to 40% of the reserve price as a loan.
The total value of NFTs pledged as collateral at BendDAO is over $59 million. A total of 272 BAYC NFTs ie 2.8% of the collection, is deposited on the platform as security. Likewise located 1.6% of the Mutant Apes collection on the platform.
BendDAO uses the so-called “Health Factor” (HF) to assess the liquidation risk. 45% of BAYCs are in the “danger zone”, meaning HR is less than 1.2. If HF is 1, the affected NFTs are likely to be excluded.
Liquidation may further lower the NFT floor price
If there are further auctions of the BAYC NFTs, the reserve prices of the other NFTs may fall further. A liquidation cascade on the NFT market could be the consequence.
Many members of the crypto community even compared the scenario to the collapse of Celsius or the crash of Voyager Capital. Until now, there have only been a few Mutant Ape foreclosures. But should NFT owners fail to repay the loans, more foreclosures may follow.
BendDAO co-founder close to liquidation
Ironically, one of the co-founders of BendDAO is himself a Bored Ape NFT owner and is about to be banned.
Another monkey owner, nicknamed Franklin, also caused a stir. Franklin Borrowed 10,000 ETH for 60 bored monkeys. While many were concerned that the liquidation of these NFTs could have a domino effect on the market, Franklin clarified that he has already repaid the loan Have.
Nevertheless, the fear of a possible liquidation wave remains. On Twitter, many users compare the scenario to the collapse of the Celsius and Voyager crypto platforms.
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