Bored Ape NFTs are being used as collateral collateral collateral

69
3
Bored Ape NFTs are being used as collateral collateral collateral

Over 1,000 BAYC NFTs are Pledged as collateral on lending protocols.

A single large holder of Bored Ape Yacht Club NFTs has sold 27 of them, worth nearly $3 million, in the past 24 hours.

The BAYC's market capitalization has decreased by nearly 8% over the past two days, bringing the collection's market value down below that of CryptoPunks, which is now the most valuable NFT collection.

Franklin, the pseudonymous seller, cited an account as the reason for the sales. The collector, a long-standing Bored Ape holder, said he sold the NFTs to pay off loans taken out on the BendDAO lending platform.

To Z, a pseudonymous trader tapped into the Bored Ape market, the price drop driven by one investor underscores the fragility of the collection's position in the NFT world. It's also contributed to bringing more than 100 Apes to the Health Factor Alert List, which means they're close to being liquidated through the auction process.

To Z, the whole drama highlights the number of people borrowing against the NFTs, which are worth about $113,000 apiece as of April 13. It's showing how overlarmed the Bored Ape Yacht Club's ecosystem is, they said on The Defiant.

Z said traders are using over 1,000 Bored Apes as collateral for loans across three lending protocols, including BendDAO, JPEG'd, where traders are borrowing against 38 Bored Apes and ParaSpace, where traders are borrowing against 625 of the tokens.

It isn't just the Bored Ape NFTs that have dropped in value this week. CloneX, another well-known PFP collection, is down 19% in the past 24 hours, according to analytics provider Nansen. As of April 14, BendDAO listed 11 of the tokens as ready for liquidation.

A well-traded collection, Pudgy Penguins is down more than 9% in the past two days, with eight of the tokens up for liquidation on JPEG. The upward price action across the board suggests that increased numbers of leveraged NFT traders may be under pressure as their positions come under pressure.

The trader also pointed out that a Blur marketplace program has incentivized people to post bids for NFTs near their floor price. This has made it much easier for traders to unload their assets than is typical - without the assistance of some incentive programs like Blur's, it isn't always possible to find buyers for a large number of high-value NFTs.

The buyer will turn around and offload any NFT they end up buying onto the next, lower bidder, because these bids are essentially from users looking to farm BLUR tokens.

This isn't the first time the drama has centered on BendDAO. Last year, the team behind the project made emergency changes to its protocol as a dearth of bids on NFTs up for auction threatened to leave BendDAO with bad debt.

The ETH has rallied more than 5% in the past week, making the current 55.5 ETH price of Bored Apes roughly $113,000. When the floor was 60.8 ETH a week ago, ETH was trading around $1,870, meaning that the floor price in dollar terms has barely budged.

With their debt denominated in ETH, leveraged traders can't afford to see their Bored Apes drop too much.