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Bored Ape Yacht Club non-fungible tokens (NFT) bought with borrowed money could be sold anytime. The selling could lead to further liquidations
A peer-to-peer lending service provider, BendDAO lets users borrow to purchase ether(Ether) against their NFTs. Now, BendDAO is likely to face this problem. Generally, customers take loans either on 30% to 40% of the NFT collection’s floor price or the minimum price to purchase one on the open market, with the NFT acting as collateral.
Over the recent months, floor prices have dropped to the point that 45 out of the 272 Bored Apes with BendDAO loans have now fallen into the “danger zone” of the platform. In this zone, NFT acting as collateral is on the verge of auctioning off. It means Bored Apes worth $5.3 million could be liquidated at any moment. Considering the popularity of BendDAO as an NFT collector, any news of the fire sale can prove to be huge. BendDAO’s 272 Bored Apes make up 2.72% of the whole collection of Apes.
Who Will Face the Consequences of Liquidations?
Other NFT lending services could also suffer implications from a mass liquidation event. Over the last year, the prominence of the NFT lending services has increased with the popularity of NFTs. Moreover, Bored Apes are among the well-known NFT collections, therefore the consequences of cascading liquidations in space can go beyond just the Bored Apes.
In a statement, BendDAO explained that the short-term fluctuations in NFT floor prices are normal. The creation of blue chip NFT didn’t happen in a day therefore it wouldn’t collapse in such a short period.
NFT collectors have started window shopping for discounted prices as more high-priced NFTs went “on sale” in the liquidations auctions. However, it is mandatory for bids on auctioned NFTs on BendDAO to be within 5% of the collection’s floor price despite their attractiveness.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
