19/08/2022 Could BendDAO Collapse the NFT Market? Maybe

Could BendDAO Collapse the NFT Market? Maybe

Key Takeaways

  • Fears of a potential liquidation cascade in the NFT market have circulated social media today as one Crypto Twitter user pointed out a large number of Bored Ape Yacht Club NFTs used as collateral were nearing liquidation points on BendDAO.
  • BendDAO is an “NFTfi” project that allows users to borrow ETH against NFTs posted as collateral.
  • BendDAO deals exclusively in high-value, blue-chip NFTs—such as Bored Ape Yacht Club, CryptoPunks, and Azuki—which are seen as barometer for the wider NFT market.

BendDAO is a so-called “NFTfi” project that lets NFT holders borrow ETH when they lock up their assets.

What Is BendDAO?

Members of the crypto community are growing concerned that another potential liquidation cascade is on the horizon, this time in the NFT market.

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The anxiety centers on BendDAO, one of several so-called “NFTfi” protocols that seek to accelerate the financialization of the NFT market. BendDAO is a lending protocol built for NFTs. ETH depositors can provide liquidity to earn yield (it currently pays 8.15% APR in ETH and BEND), while NFT holders can borrow ETH when they lock up their assets. In return, collectors get utility on their assets beyond mere flexing or owning a piece for the art itself. When someone locks up an NFT in BendDAO, they can borrow up to 40% of that collection’s floor price. However, if the floor price drops and nears the original value of the loan, the NFTcan be liquidatedand put up for auction. In this event, the borrower has 48 hours to repay the loan or face liquidation.

A pseudonymous NFT collector known as Cirrustook to Crypto Twitterto sound the alarm on BendDAO Wednesday, pointing out that $59 million worth of NFTs had been deposited to the protocol as collateral with many at risk of liquidation. They said that a “terrifying” number of Bored Ape Yacht Club NFTs deposited to the protocol were at a low health factor, a measure used to determine when an asset is near liquidation.

Bored Ape Whale Sparks Cascade Fears

Soon after Cirrus posted their tweet storm, the community’s fears grew after it emerged that a prolific Bored Ape Yacht Club member who identifies as Franklin had borrowed 10,245.37 ETH (around $19.2 million at current prices) from BendDAO. Franklin is one of the world’s biggest NFT whales, holding a portfolio of 60 Bored Apes. As they own so many apes, the concerns stemmed from the idea that they could undercut the floor price to repay their ETH debt. This could potentially lead to a liquidation cascade in which other apes deposited to BendDAO get sold off at a discount as the collection’s floor price drops (it’s worth noting that a liquidation cascade could happen with any other collection, but few are as valuable or widely used as collateral as Bored Ape Yacht Club).

Franklintook to TwitterThursday to clarify that they had repaid their debt to BendDAO, but that’s done little to calm fears. While the NFT market has so far avoided any major liquidation events, other areas of the space have been hit hard over the past year thanks to excessive use of leverage. The most notable instances of overleveraged crypto trading concerned the bankrupt crypto hedge fund Three Arrows Capital, which borrowed billions of dollars from major lenders through mostly uncollateralized loans. The crypto lender Celsius, whose business model involved promising customers lucrative yields, was one of Three Arrow’s Capital’s creditors, and it also went bankrupt as the market collapsed. Besides lending to Three Arrows, Celsius turned to DeFi and products like Grayscale’s GBTC and Lido’s staked ETH. With NFTfi protocols like BendDAO gaining pace, crypto holders may be right to fear another looming liquidity meltdown.

Crypto Briefingreached out to Cirrus for comment but had received no response at press time.

Arts

https://cryptobriefing.com/could-benddao-collapse-the-nft-market-maybe/

Interesting NFTs
YouTube Lab
YouTube logo factory. 10-second loop, 30 fps. Created using Cinema4D, X-Particles, TurbulenceFD, Octane, and After Effects.
Classical Collage
voronoi fun with some well known art
OOZY
SUPERPLASTIC (EST. 2017) X ALEX PARDEE (B. 1976) OOZY smart contract address: 0x066f2D5ead7951F0d0038C19AffD500B9F02c0e5 token ID: 4 wallet address: 0x06cAeb8090e2E7553BdFcB46e48f040FC5131afb single-channel video 00:00:06 seconds (1080 x 1080 pixels) Executed in 2021. This work is unique and is accompanied by a non-fungible token.
T(r)opical
Inspired by and for the 2018 North American Bitcoin conference in Miami, Florida. The palm tree that has a cracked open Bitcoin coconut suggests that by traveling you can enjoy this tropical digital fruit. The peacock nesting in the tree has spread its wings to flaunt other integrated crypto logos as well. The famous Miami skyline at the bottom incorporates the coins, as well as the code that is transforming the banking buildings that made it. The origin of that skyline is in the 80's cocaine craze, so it is all incorporated into the story of foundational transformation, linked to a global movement. The file size is suitable for an 8K TV. Mr. Moe Levin, the founder of the conference is a collector a physical print of the work. Explainer video: https://www.youtube.com/watch?v=2J0ZfPCJdxY&feature=emb_title Upload resolution 8000x4000 PX at 300DPI
The Scion
A young figure caught in a moment of distraction, aware only ephemerally of his unconscious being, as it engages in psychological and psychedelic layer spaces. His right arm casually cradles a moray eel; the figure is comfortable but not truly aware of the potentials for danger in such negligence. His shirt reads “Bello” in Pokemon style font, harkening back to a childhood straddling the millennial threshold. To his right side, out of the unconscious deep, shrouded alien heads propagate as a fractal totem, each new iteration a more sophisticated rendering of emotional masking over the cold mystery of the greys. As the scion of the Budgie-Sattva, the young man, in his distraction, is also simultaneously aware of higher levels of self discovery. To his left a psychological topology sets beneath the oracle side of an 8 ball ,hovering; its message a purest concept of acceptance. The “Scion” lettering is in 80’s HeMan style bold declaration. The lower right side of the painting is like a hybrid of melon, feathers, and seeds. The crystals in the background bring light; conducted, refracted, reflected, and dispersed, to balance the dark shadow of the figure’s physical body. The aura of the scion succeeds in layers to point, with a finger, and the crown chakra, toward a center of a mandala existing as nigh pure application of strokes, in essence painterly abstraction, but also revealing hints of the Aura of migraine, and the bi-hemispherical nature of the brain–noting concerns of the possibility of inherited mental disease. Yet the flourish of chakra as it sets against that center is robust, active, coherent, and reveling against all fear. Fundamentally, the piece speaks to the activation of one’s potential to begin to “Know Thyself”, and find greater awareness out of the enigmas of the mind–as an inculcated seed given to the rich soil of one’s own birthright.