By
Benjamin Njiri
April 23rd, 2024
In terms of health indicators, several pledged BAYC NFTs are trading in the danger zone on the peer-to-peer platform BenDAO and could face liquidations in case of failure to repay the ETH loans.
The non-fungible tokens (NFT) market is witnessing major headwinds as the broader cryptocurrency market faces intense selling pressure. The floor price of popular NFT projects has been hitting new lows. As per the latest report, the floor price of the Ethereum-based Bored Ape Yacht Club (BAYC) NFT collection has dropped to its lowest since the beginning of the year. The recent floor price of BAYC NFTs is 65.68 ETH, the levels not seen in the last eight months.
BAYC NFT Floor Price
The data from CoinGecko also shows that the floor price of BAYC NFTs has crashed by more than 50% since May 1, 2022. On that date, the BAYC NFT floor price peaked at 153.70 ETH.
At 656,800 ETH, BAYC is one of the biggest NFT collections in terms of market capitalization. Its closest competitor is CryptoPunks having a market cap of 655,000 ETH and a floor price of 65.5 ETH. There’s always been tough competition between BAYC NFT collection and the CryptoPunks NFT collection over their floor prices.
BAYC Facing Liquidation Challenge on BenDAO
The recent drop in the BAYC floor price can be attributed to the possible liquidations taking place on BenDAO. These are particularly those Bored Ape NFTs bought using loans available on the peer-to-peer platform BenDAO. As the floor price of the BAYC NFT collection heads lower, more liquidations could follow.
The peer-to-peer platform allows users to buy ETH in exchange for NFTs. It allows users to take loans up to 40% of the floor price of NFTs. In case, the floor price of the NFT drops to a point wherein the loan’s health-factor drops under 1, BenDAO will place the NFT ins a 48-hour auction and sell it to the highest bidder if the loan remains unpaid.
The definition of the health factor is a “numeric representation of the safety of your deposited NFT against the borrowed ETH and its underlying value”. Currently, there are 72 BAYC NFTs in the “danger zone” on the BenDAO platform. A danger zone is the one where the health factor drops under 1.2, wherein the NFTs have a greater risk of a drop in the floor price thereby triggering a liquidation.
In its FAQs, BenDAO has mentioned that the short-term fluctuations in NFT prices are normal. It also adds that “Consensus on bluechip NFTs wasn’t built in a day, and it will not be collapsed in a short period of time”. However, it has yet to clarify what happens when no buyers turn out to buy the NFTs put for liquidation.