Liquidation Fears Mount as BAYC NFTs Floor Price Drops

21 August 2022, 13:30 GMT+0000
Updated by Ryan James
21 August 2022, 13:30 GMT+0000
In Brief
  • Several Bored Ape NFT holders borrowed against their NFT on BendDAO
  • Liquidation risk has been rising because Bored Ape NFTs floor price has been falling.
  • BendDAO cofounder also risks being liquidated on his platform.
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Fears of liquidation have gripped the non-fungible token market after it emerged that several Bored Apes and Mutant Apes holders borrowed against their NFTs on BendDAO.

The news broke out on Twitter after a user shared a screenshot of a Bored Ape NFT made available for auction.

With the floor price of Bored Ape now at 72 ETH, BAYC #533, which was used as collateral against a 66.95 ETH loan, has now been listed for auction.

Although no one has made a bid for the NFT yet, it appears that several other Bored Apes holders borrowed around 60 ETH on the protocol too. 

BendDAO is one of the popular peer-to-peer NFTFi protocols that allow people to borrow ETH against the floor price of their NFTs. Usually, NFT holders can borrow up to 40% of the floor price. 

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Overall, NFTs used as collateral on BendDAO are worth over $59 million. A total of 272 BAYCs which is 2.8% of the collection are collateral on the platform, while 1.6% Mutant Apes collection are also there. 

With several of these NFTs having low health factors, the risk of liquidation is significant. Forty-five of the BAYCs are in the danger zone, which is a health factor below 1.2 that suggests they are close to being auctioned off.

Liquidation might further tank BAYC floor price

The fear is that if these BAYCs are auctioned off, it might further drive the floor price lower, hence triggering a massive liquidation in the NFT market.

However, the concerns still remain with many comparing the potential of an NFT liquidation similar to Celsius or Voyager’s crash.

So far, there have been a few Mutant Apes auctions already, but more could follow if the debtors don’t repay their loan and get liquidated.

BendDAO Cofounder also close to liquidation

Ironically, one of the Bored Apes holders dangerously close to getting auctioned is the co-founder of BendDAO itself.

Another debtor that seems to catch attention is Franklin, who borrowed 10,000 ETH against 60 Bored Apes. While many were concerned that their liquidation could have a seismic impact on the market, he clarified that he has repaid his loan.

However, the concerns remain with many comparing the potential of an NFT liquidation similar to Celsius or Voyager’s crash.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.

Disclaimer

BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.