Bored Ape Yacht Club Loan Deathspiral Could Destroy Entire NFT Market, Crypto Analyst Warns
A series of Bored Ape Yacht Club (BAYC) loan settlements on NFT liquidity pool BendDAO could wipe out the entire NFT market, warned pseudonymous cryptoanalyst “doubleQ”.
What happened: BAYC holders who deposited their NFTs on BendDAO in exchange for short-term Ethereum ETH/USD is at risk of being liquidated and losing its assets, according to data from BendDAO.
BAYC loan death spiral begins pic.twitter.com/k4DZ0z4TSn
— moon (@MoonOverlord) 19 August 2022
See also: WHAT IS THE BORED APE YACHT CLUB?
BendDAO is a peer-to-peer decentralized lending platform for NFTs. Users can deposit their Bored Ape NFTs on the platform as collateral and get a loan worth up to 40% of the NFT value.
As the price floor for the BAYC collection has fallen to 72 ETH, according to data from CryptoSlam, the health factor of Bored Apes depositors has dropped to health levels below 1.2, indicating that a mass liquidation event is likely to unfold.
5/ BendDAO currently has 272 BAYCs (2.72% supply) and 309 MAYCs (1.59% supply)
Other platforms also have quite a large amount of almost liquidation loans
Liquidation will cause a death spiral for the BAYC ecosystem and the NFT market as a whole. pic.twitter.com/m4s1ciZQ99
— doubleQ (@xDoubleQ) 19 August 2022
“Opensea volume is at its lowest point ever in the last 12 months. There is simply not enough volume to save these liquidations,” doubleQ said on Twitter. “It’s inevitable.”
If you have a BAYC, consider getting out before the defenses fall. Which is >65 eth.
Once the price of the 64th floor is reached, the death spiral begins. Dm or send a message if you need a private chat. #baycdeathspiral #bayc
— CRYPTO_POON | Quant Trader | MM | Investor | YT (@Crypto_POON) 18 August 2022
Although BendDAO only accounts for two to three percent of BAYC supply, the implications of the liquidations could still put significant pressure on the underlying pool’s floor price.
And that will cause the floor price to fall and lead to more monkeys used as collateral coming onto the auction block.
— Normie (@NormieNFT) 19 August 2022
See also: Ethereum co-founder Vitalik Buterin: Millions of people have crypto wallets to exchange monkey pictures
Price action: At press time, ApeCoin APE/USDthe native token of the BAYC ecosystem, traded at $5.61, down 8.6% over 24 hours.
Bitcoin BTC/USD, Ethereum ETH/USD and Dogecoin DOGE/USD were traded at $23,100, $1,184 and $0.075 respectively.
