Liquidity crunch may loom for Bored Ape-collateralized loans as floor price slides

Liquidity crunch may loom for Bored Ape-collateralized loans as floor price slides

Not every NFT collection is facing the same issue, but due to the collection’s outsized influence it could have a significant impact on the rest of the Ethereum NFT ecosystem.

The floor price for Bored Ape Yacht Club non-fungible tokens, a leader among NFT collections, has fallen to an eight-month low, raising the risk that dozens of the NFTs used as collateral for decentralized lending service BendDAO may be forcibly sold.

That scenario could then trigger a cascade of further liquidations, said Anndy Lian, author of the new book NFT: From Zero to Hero, in an interview with Forkast.

BendDAO is a peer-to-peer platform that allows users to front NFTs as collateral for Ethereum loans for roughly 30% to 40% of the NFTs floor price — or the minimum price to purchase one of the Bored Ape Yacht Club NFTs on the open market.

Currently, 121 of the 227 Bored Apes collateralized on BendDAO — 2.27% of the entire collection — are considered to be at risk of liquidation as the collection’s floor price nears the level at which the tokens are valued on the platform.

With Bored Apes the second highest-selling NFT collection, Lian said a liquidation of this size would only put further downward pressure on the collection itself, others on the network, and even on the price of Ethereum itself. Combined with existing macro-economic pressure likely facing the crypto market this year, that could spell more grief for investors.

“That downstream issue [could] then create a really, really bad winter for everyone else next year,” he added.

Sick apes

BendDAO rates the risk level of a collateralized NFT via a so-called “health factor,” which is a ratio of the individual NFT’s value compared to the collection’s floor price. When that metric falls below 1, the token is automatically entered into a liquidity state for 48-hours to give the owner the chance to pay off the loan and interest to earn the token back or place it up for auction.

In response to the liquidation threat, BendDAO said Monday in a blog post they would be adjusting the liquidation threshold for these assets to 70% of the floor price by Sept. 20 over four stages with the first adjustment to 85% taking place on Aug. 30.

They also said they would be shortening the auction period to just 4 hours to improve liquidity for auctions.

“We are sorry that we underestimated how illiquid NFTs could be in a bear market when setting the initial parameters,” the BendDAO blog post read. “In the past several days, we got tons of feedback and suggestions from the community.”

The BAYC collection’s current floor price of 68.48 Eth marks a 55% plunge from a high in early May of 153 Eth, which Lian attributes to two main factors.

Merge factor

“Number one is that the overall market is not in the best condition,” he said. “Number two is there are still people with doubts on Ethereum 2.0. This adds some anxiety to people who are holding onto NFTs and using it as a collateral.”

Ethereum 2.0, usually referred to as “the Merge”, will involve the world’s second-largest blockchain mainnet transitioning from its current proof-of-work consensus mechanism to a proof-of-stake system. This change will make the network vastly more energy efficient, but will make Ether crypto miners effectively redundant, which has caused some miners to push back against the transition.

“It is actually a big concern for a lot of NFT speculators because the chances of them selling their NFT or BAYC at a certain high price is not going to come anytime soon,” Lian said of the sluggish sales figures.  “This is worrying.”

 

Original Source: https://forkast.news/liquidity-crunch-bored-ape-loan-floor-price/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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Elon Musk changes Twitter pic to Bored Ape NFTs, experts advise thorough research on investments

Elon Musk changes Twitter pic to Bored Ape NFTs, experts advise thorough research on investments

Even as billionaire Tesla CEO Elon Musk has put up a collage picture featuring several Bored Ape nonfungible tokens (NFTs) as his Twitter profile picture, with Ape 5809 in the center, experts have advised that investments should be based on thorough research and that investors should not get swayed by the views of any one individual.

Musk’s Twitter profile picture change was followed by a tweet that said, “I dunno … seems kinda fungible.”

The NFTs featured in Musk’s profile picture are all from different artists, each with a unique design and serial number.

ApeCoin, used to vote on community decisions and other services within the popular Bored Ape Yacht Club (BAYC) ecosystem, immediately surged 20% to $17.60, data showed after the change, and was trading at $157 later in the day.

“We have seen the effect of Musk’s Twitter play on APE. This only goes on to prove once again how vulnerable cryptos are. Any currency, whether fiat or cryptos, should not get swayed by any one person, irrespective of his position or net worth. What is needed here is that the crypto community rallies together and does not buy or sell tokens basis the views of any one individual. There should be thorough research done before buying new tokens. People can make sound returns on their investments only if they invest for the long term based on their own research of the fundamentals surrounding the token,” says Aliasgar Merchant, Developer Relations Engineer at Ignite.

Shortly after Musk made the change, Michael Bouhanna, a contemporary art specialist at auction house Sotheby’s, took to Twitter to call him out for using the image. Bouhanna said he created the picture for Sotheby’s $24 million sale of 101 Bored Apes in September, which included Ape 5809.

Musk, who recently hogged the headlines for acquiring Twitter, is a crypto enthusiast and the recent move shows his apparent interest in NFTs too.

Anndy Lian, Chairman, BigONE exchange, says that Musk is trying to tell people that NFTs are kind of fungible in some ways and that one can replicate it freely, put it anywhere one wants but does not own it.

“The other thing is I do see a surge of 19% on ApeCoin when Elon changed his profile image to Bored Ape NFT. Playing the devil here. I would really hope to see a token plunges next time when Elon tweets about it. This would an interesting social experiment,” Lian adds.

Raj Kapoor, chief Advisor at aCryptoverse, a blockchain and crypto advisory firm, says Musk has a significant influence over the cryptocurrency market and this was clearly on display by this move.

“If we also observe, almost 10 Bored Apes had been sold since Musk revised his Twitter profile photo, and the floor price had raised by 10 Eth. I would call this the Musk Effect,” Kapoor says.

NFTs are non-interchangeable units of data stored on a blockchain that can be sold and traded and are often associated with digital files such as photos, videos, and audio.

BAYC NFTs are highly desired among NFT collectors. The recent NFT project launch by Yuga Labs, makers of the Bored Ape NFT, caused gas fees on Ethereum to rise by thousands of dollars.

Several celebrities have or had put up Bored Ape pictures as Twitter profile pictures in recent times. Basketball star Stephen Curry and musician Steve Aoki are among the celebrities who have done it.

Musk received flak from the NFT community, with some saying Elon Musk made a collage of “screenshotted bored apes his profile picture to troll NFT owners.” Others believe Musk is trying to signal his intention to get into the NFT space.

 

 

 

Original Source: https://blockchainassetreview.com/elon-musk-changes-twitter-pic-to-bored-ape-nfts-experts-advise-thorough-research-on-investments/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

j j j