Top Crypto News Today: Bored Ape Yacht NFTs on the Verge of Liquidation as the Price Drops to 8-Month Low

Key Takeaways

• Blue Chip NFT collection BAYC’s floor price is at an all-time low. 
• BAYC faces liquidation on BenDao owing to slumping NFT floor prices
• 72 BAYC NFTs have dropped in the red
• Terra’s collapse has left a domino effect on ETH-linked NFT projects 

Crypto Winter hits BAYC assets

With the market trying to recover from its long-standing market crash, the recent numbers coming from the Federal Reserve on interest rates hike and inflation has impacted the most popular NFT collection ‘Bored Ape Yacht Club’.  The blue-chip nft project is enduring the lowest value as of now. Trading at 65.68 ETH at the time of writing, the project is at an all-time low since its last all-time high of 153.7 ETH on May 1, 2022. (Source: CoinGecko) 

Market Cap of Bored Ape Yacht Club 

BAYC has a market cap of 656,800 ETH, making it the number one NFT project with CryptoPunks at 655,000 ETH. BAYC had a sales volume of approximately $52 million in July, 2022. 

Does the price slump mean bad for NFT holders?

Technically, it is not alarming news for BAYC NFT holders since the oscillating value of ETH when converted to US Dollar accounts to $107,000 which is lower compared to $256,000 valuation at the beginning of the year. But, it is higher than June’s record of $87,000. 

BAYC faces liquidation due to pending debts on BenDAO.

While the plummeting floor price of BAYC was not enough, the project is facing a major liquidation event owing to their pending loans acquired through BenDAO – a peer-to-peer lending service.

The DAO allows investors to loan ETH in exchange for Non Fungible Tokens. The loan amounts equate to 40% of an asset’s floor price. In case of the NFT asset’s value drops beyond the NFT backed loan amount which is calculated as “Health Factor” which is below 1. Once the number surpasses the threshold, the NFT is placed for an auction in 48 hours and will be sold to the highest bidder if the loan isn’t repaid by the borrower.  

The health factor of an NFT can be defined as ‘’the monetary value of an NFT against the ETH loan borrowed by an individual. At the moment there are 72 Bored Ape Yacht Club NFTs that are swinging in the red danger zone. NFT Trader Circus shared the health factor report of BAYC in which the level of safety in terms of value has dropped below 1.2 indicating the possibility of the project’s shakedown. 

BenDAO’s terms at a glance 

The BenDAO’s FAQs state 

‘“short-term fluctuations in NFT floor price are normal,” and that, “Consensus on bluechip NFTs wasn’t built in a day, and it will not be collapsed in a short period of time.”

The documentation of the DAO states the following

“the platform only has a temporary floating loss and no actual losses,” but leaves open the question of what happens if no buyer steps in, and the value of the NFT falls below that of the interest-accruing debt.

Terra’s collapse have hit even the best in crypto

Terra LUNA Crypto Crash has left a domino effect on the crypto market, as the de pegging of the crypto asset brought the entire ecosystem under the surveillance radar and also caused anxiety in crypto investors. Since BAYC and other popular blue chip NFTs’ have a direct link to ETH, its no surprise that the NFT category in crypto too bit the bullet.

Source: Decrypt