NFT liquidity protocol BendDAO experienced heightened withdrawal activity over the weekend after an NFT observer warned of a potential cascade of selling pressure on a large number of NFTs held by the DAO as collateral for loans.
BendDAO’s loan to value increased from 51% on Friday to 102% by Sunday evening. The DAO ended the weekend with a supply of 13,487 ETH and a debt of 14,539 ETH. However, it still holds a total of 897 NFTs as collateral.
BendDAO is used to borrow ETH against NFTs as collateral and currently holds a total of 241 Bored Apes, 280 Mutant Apes, and 29 CryptoPunks. It also holds a number of other NFT collections such as Doodle, Azuki, and CloneX with an estimated collateral value of 22,556 ETH.
On Sunday, the DAO received more than $2 million in loan repayments, some from Bored Ape holders who repaid more than $900,000 on Saturday. However, around 9,000 ETH, worth more than $16 million, were also withdrawn on Saturday and a further $12.6 million on Sunday. As a result, the deposit APR spiked to 73% with the borrowing rate rising to 108%.
Briefly on Saturday, the floor price of CryptoPunks was higher than that of the Bored Ape Yacht Club for the first time since December as some Bored Ape holders risked their NFTs becoming liquidated after they failed to pay their loans. The Bored Ape floor price fell below 66 ETH on Saturday with the CryptoPunks floor resting at the 66 mark.
What caused the BendDAO Bored Ape dip?
The downturn seems to have been caused by several Bored Apes that were auctioned on BendDAO following an automatic listing triggered when the floor price of the NFT comprises 10% more of the total loan value. NFT holders can borrow up to 40% of their collectibles’ current floor price.
The Bored Ape dip on the BendDAO was swiftly followed by selling pressure on NFT marketplace OpenSea, with some Bored Apes selling on Sunday below the floor price. However, no Bored Apes seem to have been liquidated from the BendDAO during the weekend and some, which were listed last week, were eventually withdrawn.
NFT observers are claiming that the risk of BendDAO lies in the fact that many Bored Ape holders had taken loans against their Apes which could eventually become higher in value than the NFTs themselves if the floor price keeps decreasing.
Such a scenario could risk leaving BendDAO holding a large bag of Bored Apes with ETH depositors taking the hit as the original Bored Ape holders have no incentive to buy back their artwork. If such a scenario occurs it may increase general selling pressure in the NFT market which crashed from its peak of $189 million in daily sales in January to $28.8 million in May.