Don’t Miss Blue-Chip NFT Deals as BendDAO Liquidates Assets

Fears are growing among NFT enthusiasts as BendDAO, a cryptocurrency lender using NFTs as collateral, prepares to be liquidated. Bored Ape Yacht Club NFTs are currently the subject of widespread fire sales chatter. But the plan goes further than that. There appears to be a stack of Doodles, Azuki, and RTFKT NFTs as well.

Consequently, what is going on with BendDAO, and how can you score a Blue-chip deal?
Using your Blue-chip NFTs as collateral, you can borrow ETH through the BendDAO lending system. Therefore, as the owner of a Blue-chip NFT, you have immediate access to ETH. Then, individuals that lend ETH receive immediate interest. Users basically win out in this situation. The borrower will have 48 hours to pay back the loan to protect themselves from losses brought on by market swings.

Several factors contribute to liquidation. Firstly, as a result of several Blue-chip NFTS’s declining floor pricing. When this occurs, the NFT-backed loan’s “health factor” falls below 1. For instance, if you take out a loan at a BAYC of 100 Ether, you can immediately borrow 40 Ether. However, the 48-hour liquidation mechanism is triggered if BAYC’s floor price falls to 44eth. This will guarantee that the lender will get their money back plus interest. Last was demonstrated this week when BAYC #533, which served as security for a loan of 66.95 ETH, was put up for auction.

Second, BendDAO has run into a challenging circumstance. Only 12.8 WETH of their original contract remain with them. As a result, customers who received loans through BendDAO are unable to get their money back. The amount of ETH still in their contract is less than the entire amount of ETH loaned as of the time of writing (13,000 ETH). The ‘debt’ owed to the NFTs is hence rapidly increasing.
The planned improvements may result in some incredible savings on Blue-chip NFTs in the upcoming month. They will hold an auction for a large number of previously unlisted NFTs if the plan is approved. BendDAO is assuring that NFTs can be auctioned off before the floor lowers to disastrous levels by lowering the threshold for asset liquidation.

Keep an eye on the BendDAO ‘Loans in Auction’ page to start bidding if you wish to follow the auction action and try to find a Blue-chip deal.

These are, in fact, being auctioned off, but the vast majority of NFTs are being sold without any bids. There are currently just 4 bids on the 17 MAYC that are up for sale. Due to BendDAO’s requirement that bids be higher than both the loan balance and the OpenSea floor price, there aren’t enough bids. Most individuals do not want to purchase them since debt can be larger than the floor. Additionally, you must lock up your ETH for 48 hours in order to open a bid, which is a risk that many people are unwilling to accept.

Therefore, the DAO is stuck holding defaulted NFT loans with a bigger debt than they are now worth because no one is placing a bid. In order to pay the lenders, the DAO must figure out how to get the ETH from these NFTs.

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BendDAO is recommending modifications to the loan protocol to lessen this. One suggestion is to reduce the duration of auctions from 48 to 4 hours, removing the possibility of having your ETH locked up for two days. Another adjustment would be to change the minimum starting bid from 95% of the floor price to the total debt on the NFT. Because of this, there will be a lot more bidders because the difference between the floor price and starting price will be considerably higher.

Finally, BendDAO is instructing us on how to get ready for the bear market during a bull market. Even while it can feel comfortable to use NFTs as collateral in a bull market, many NFT loan companies still operate under an outdated business model. Having said that, the NFT community as a whole is excited for the sale. Who doesn’t enjoy a good blue-chip NFT deal, after all?