The Ethereum floor price of Bored Ape Yacht Club (BAYC) NFT the collection has fallen to its lowest level since the start of the year, amid a continued NFT market decline and broader crypto market crash.
At 65.68 ETH, the floor price of Bored Ape Yacht Club NFTs has fallen to levels not seen since January 2, 2022. According to data from CoinGeckoit has been on a downtrend since reaching an all-time high of 153.7 ETH on May 1st.
BAYC remains the largest NFT pool by market cap, at 656,800 ETH—right above its nearest rival, CryptoPunkswith a total market cap of 655,000 ETH and floor price of 65.5 ETH.
It’s not all bad news for Bored Ape keepers, though. Ethereum’s fluctuating price means that in dollar terms, the BAYC floor price is around $107,000 today; significantly lower than at the start of the year, when it was just under $256,000, but up from a low of just under $87,000 recorded in June.
BAYC faces liquidations on BenDAO
To add fuel to the flames, Bored Apes bought with the help of loans on the peer-to-peer lending service BenDAO could risk liquidation, due to the collection’s falling floor price.
BenDAO, which allows customers to borrow ETH in exchange for NFTs, enables users to borrow up to 40% of an NFT’s floor price. Should the floor price of NFT fall to a point where the NFT-backed loan’s “health factor” is below 1, the NFT is placed in a 48-hour auction and sold to the highest bidder if the loan is not repaid.
The health factor is defined as a “numerical representation of the security of your deposited NFT against the borrowed ETH and its underlying value.”
There are currently 72 Bored Ape Yacht Club NFTs on the platform in the “danger zone”, defined by NFT trader Cirrus, which broke the news of the potential liquidations, as having a health factor below 1.2 – where they are at risk of a fall in the price floor which triggers a liquidation.
A health factor below 1.2 means you are at risk.
A 17% drop of your NFT floor triggers a liquidation.
BenDAO states in its FAQ that “short-term fluctuations in the NFT floor price are normal,” and that “The consensus on bluechip NFTs was not built in a day, and it will not collapse in a short period of time.”
The filing also notes that “the platform only has a temporary floating loss and no actual loss,” but leaves open the question of what happens if no buyer steps in and the value of the NFT falls below the interest-bearing debt.
With the BAYC floor price down 57% from its all-time high in May, and 2.57% of the BAYC collection connected for BendDAO, it is a question that may become urgent.
NFTs track the decline in the crypto market
NFTs like BAYC that operate on the Ethereum network and are sold for Ether (ETH) tend to shadow the price of Ethereum.
Following the collapse of Terra’s algorithmic stablecoin UST in May and the bankruptcy filings of hedge fund Three Arrows Capital and crypto lender Celsius Network in June, Ethereum lost 43% of its value.
The floor price of BAYC fell correspondingly by 36%, from 116 ETH to 65.5 ETH in the same period from May to June.
However, as investors prepare to capitalize on Ethereum’s upcoming merger, NFTs have broken stride with the second largest cryptocurrency by market capitalization.
Between June 19 and August 20, Ethereum rose from an eight-month low of $995 to $1,634, while BAYC’s floor price has continued to fall.
Zooming out, the NFT market as a whole has not fared well over the past 12 months.
Number of NFT sales vs. sales in USD. Source: NonFungible.com
Daily sales figures (orange) have declined while the dollar value of sales (white) remains stagnant.
According to NonFungible.com’s Q2 2022 industry report“interest has waned” in NFTs, with “geopolitical concerns” hampering the market.
“Liquidity of most collections has declined considerably, reducing the rate of issuance on the secondary market,” the report suggests.
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