The Ethereum price floor of NFT’s largest collection has slipped to its lowest level since the start of the year.
At 65.68 ETH, the floor price of Bored Ape Yacht Club NFTs has fallen to levels not seen since January 2, 2022. According to data from CoinGecko, it has been trending lower since hitting a high. history of 153.7 ETH on May 1.
BAYC remains the largest collection of NFTs by market cap, with 656,800 ETH – just above its closest rival, CryptoPunks, with a total market cap of 655,000 ETH and a floor price of 65.5 ETH.
However, it’s not all bad news for Bored Ape wielders. The fluctuation in the price of Ethereum means that in terms of dollars, the floor price of BAYC is around $107,000 today; noticeably lower than at the start of the year, when it was just below $256,000, but up from a low of just under $87,000, recorded in June.
BAYC faces liquidations on BenDAO
To add fuel to the fire, Bored Apes acquired using loans on peer-to-peer lending service BenDAO could be liquidated, due to the drop in the collection floor price.
BenDAO, which allows customers to borrow ETH in exchange for NFTs, allows users to take out loans for up to 40% of the floor price of an NFT. If the floor price of the NFT drops to a point where the “health factor” of the loan secured by the NFT is less than 1, the NFT is placed in a 48-hour auction and sold to the highest bidder if the loan is not repaid.
The health factor is defined as a “digital representation of the security of your deposited NFT against the borrowed ETH and its underlying value.”
There are currently 72 Bored Ape Yacht Club NFTs on the platform in the “danger zone,” defined by NFT trader Cirrus, who broke news of the potential liquidations, as having a health factor below 1.2 where they risk that a drop in the price floor triggers a liquidation.
3. What is supposed to mean?
If you allow the health factor (defined below) of your loan to fall below 1, your NFT is put up for a 48 hour auction and sold to the highest bidder if you don’t repay the loan in time. pic.twitter.com/ntDNtScij8
— Cirrus (@CirrusNFT) August 17, 2022
BenDAO states in its FAQ that “short-term fluctuations in the floor price of NFTs are normal” and “the consensus on blue chip NFTs wasn’t built in a day and won’t fall apart in a short period of time.”
Its documentation also notes that “the platform only has a temporary floating loss and no real loss“, but leaves open the question of what happens if no buyer presents itself and the value of the NFT falls below that of the debt with accrued interest.
With BAYC’s price floor down 57% from its all-time high recorded in May, and 2.57% of BAYC’s collection tied to BendDAO, this is a question that could become pressing.
NFTs Track Cryptocurrency Market Collapse
NFTs like BAYC that operate on the Ethereum network and are sold for Ether (ETH) tend to follow the course of Ethereum.
After the collapse of UST, Terra’s algorithmic stablecoin, in May, and the bankruptcy filing of hedge fund Three Arrows Capital and cryptocurrency lender Celsius Network in June, Ethereum lost 43% of its value. value.
BAYC’s floor price meanwhile fell 36% from 116 ETH to 65.5 ETH over the same period from May to June.
However, as investors prepare to capitalize on the upcoming Ethereum merger, NFTs have broken away from the second-largest cryptocurrency by market capitalization.
Between June 19 and August 20, Ethereum fell from an 8-month low of $995 to $1,634, while the BAYC price floor continued to decline.
Zooming out, the NFT market as a whole hasn’t fared well over the past 12 months.
The number of daily sales (in orange) decreased, while the dollar value of sales (in white) stagnated.
According to NonFungible.com’s Q2 2022 industry report, “interest has dropped” for NFTs, “geopolitical concerns” hindering the market.
“The liquidity of most collections has decreased significantly, thus lowering the release rate in the secondary market“, suggests the report.
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