Liquidation fears increase as BAYC NFT’s floor price falls

by James · August 21, 2022

Fears of liquidation have gripped the non-fungible token market after it emerged that several Bored Apes and Mutant Apes holders were borrowing against their NFTs on BendDAO.

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

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

g.m.

As a result of the floor falling to 72, the first BAYC liquidation auction on BendDAO has begun

Starting price of 68.4e…

Anyone catching on or is this going to be the first bad debt domino to fall for the platform? pic.twitter.com/7qxsIi661e

— Cirrus (@CirrusNFT) 18 August 2022

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

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

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

There are currently 32,267 ETH ($59,048,610) worth of NFTs used as collateral for loans on BendDAO alone

For the first time ever, many of these are in serious danger of liquidation

A thread about the biggest single risk for the NFT market that no one is talking about

— Cirrus (@CirrusNFT) 17 August 2022

With several of these NFTs having low health factors, the risk of liquidation is significant. 45 of the BAYCs are at risk, which is a health factor below 1.2 that suggests they are close to being auctioned off.

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Liquidation can further tank BAYC floor price

The fear is that if these BAYCs are auctioned off, it could further lead to a lower floor price, thus triggering a massive liquidation in the NFT market.

Concerns remain, however, 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 may follow if the debtors do not repay the loan and are liquidated.

BendDAO Cofounder is also close to liquidation

Ironically, one of the Bored Apes holders that is dangerously close to being auctioned is the co-founder of BendDAO himself.

Another debtor who seems to be catching attention is Franklin, who borrowed 10,000 ETH against 60 boring monkeys. While many were concerned that their liquidation could have a seismic impact on the market, he clarified that he has paid off his loan.

I currently owe 0 ETH to BendDAO and have 60 monkeys in my wallet. I have borrowed 10245.37 ETH from them and have paid it off plus 9.13 ETH total interest. If I was 10k ETH in debt, I wouldn’t pay out and would be chilling on an island right now. Starting a small space now. pic.twitter.com/qEf2xInzoA

– Franklin has 60 monkeys (@franklinisbored) 18 August 2022

Concerns remain, however, with many comparing the potential of an NFT liquidation to that of Celsius or Voyager’s crash.

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