Be Prepared For The Worst - Bored Ape Lending Protocol Hitting Dangerous Levels

A series of loan liquidations are about to be triggered on lending protocol BendDAO - where users have place their Bored Ape Yacht Club NFTs as collateral in return for tens/hundreds of thousands of dollars in Ethereum loan.

BendDAO is a peer-to-peer decentralized lending platform for NFTs. Users can connect their wallet to BendDAO and receive a short term loan up to 40% of the NFTs value, with the NFT then pledged as collateral.

NFT floor prices and volume on major NFT marketplaces have taken a large tumble in the recent months. So much so, that 45 of there 272 Bored Apes (2.72% of the supply) with BendDAO loans tied to them are now in what BendDAO calls the ‘danger zone’, when the health factor of a Bored Ape reaches below 1 and a liquidation auction is triggered. This means over $5m in Bored Apes are about to be auctioned off, in some of the lowest volume market conditions we’ve seen in recent months. Should these Bored Ape liquidation auctions be triggered, with not enough buyers. There could potentially be a catastrophic hit to the NFT market. Be prepared for the worst.

A mass liquidation event could have implications for other NFT lending services, as well as implications to floor prices to NFT collections across the crypto sphere. BendDAO issues a statement regarding Bored Ape Yacht Club’s floor price stating: “Consensus on blue chip NFTs wasn’t built in a day, and it will not be collapsed in a short period of time.”

“Consensus on blue chip NFTs wasn’t built in a day, and it will not be collapsed in a short period of time.” - BendDAO statement

Prominent Bored Ape Yacht Club investor Franklin known as Franklin Is Bored on Twitter, took to the social media site to post about BendDAO and his use of the protocol. Franklin owns 60 Bored Ape Yacht Club NFTs and has borrowed over 10,000 ETH from the BendDAO platform. Franklin is famous for posting his 1-2 ETH flips on blue chip NFTs in the market. Impressively, his post also showed that he garnered a total of 9 ETH interest total on the 10,000 he borrowed. Bravo, Franklin. Bravo.

Not all were impressed with Franklin’s lending/flipping shenanigans however, with many on Twitter stating the danger of ‘whales’ controlling the market and putting the smaller fish in the ecosystem in danger.

It’ll be interesting to see how the BendDAO situation unfolds, with the floor price decreasing, and many liquidation auctions coming up.