Degen Tales: NFT Flash Sale
Meet Paul. Paul is a crypto degen in every sense of the word. He spent his life savings on a Bored Ape Yacht Club NFT, because, why not? Everyone was getting one. Justin Beiber, Snoop Dogg, Reese Witherspoon, and superstar Neymar Jnr, just to name a few. You’d have to be a fool not to go along with the hype. And it was all well until it wasn’t.
When Bitcoin fell from its 69k high, it wasn’t just altcoins that came down along with it. NFTs did too, and blue chip NFTs were not left out. What did go up was inflation, so the cost of living also went up. What was Paul going to do now? He wouldn’t want to sell his NFT because it was below his buy price. I’ll HODL, Paul says. But Paul needs the money. In comes BendDAO.
WTF is BendDAO?
BendDAO is a peer-to-pool based NFT liquidity protocol. Depositors provide ETH liquidity to earn interest and in turn, NFT holders are able to instantly borrow ETH through the lending pool using NFTs as collateral. Most NFTs are collateralized at 30–40% of the floor value
So, if I take a loan on an ape at 100 ETH floor I can expect to receive a 30–40 ETH loan.
But there’s a catch. A 17% drop in the NFTs floor triggers a liquidation. The NFT is then auctioned. The highest bidder will get the NFT if the borrower doesn’t repay 50% of the loan and pay the fine within the 48h liquidation protection starting from the beginning of the auction.
Paul is not the only one in this situation. 2.8% of Bored Ape Yacht Club supply and 1.6% of Mutant Ape Yacht Club supply are currently in the BendDAO wallet, and they are all so close to being liquidated.
NFT Volume is at yearly lows and there simply isn’t enough liquidity in the market to absorb all of these liquidations without a severe impact on floors.
This situation is not only a headache for Paul, but for BendDAO as well. They have run out of ETH with just 12.5 WETH sitting in the contract. People who lent money (about 15,000 ETH) to others via BendDAO to buy NFTs on leverage can’t pull their money out.
Desperate times call for desperate measures. To encourage more depositors and increase the ETH deposits. BendDAO founder has called for a vote to make emergency changes to the protocol. If the vote passes there’s a high likelihood of 600+ liquidation auctions of NFTs over the next month. They are also adjusting interest rates to 20% to encourage more depositors and also prompt NFT holders to pay up their loans
This represents one of the most opportune buying windows for MAYC and BAYC ever.
Better get your ETH ready. We’re about to go NFT shopping.
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