Bored Apes Drop 8% As Major Holder Exits
Over 1,000 BAYC NFTs Are Pledged As Collateral On Lending Protocols
By: Owen Fernau •NFT News
A single large holder of Bored Ape Yacht Club (BAYC) NFTs has sold 27 of them, worth nearly $3M, in the past day.
Over the past two days, the BAYC floor price has fallen by nearly 8%, pushing the collection’s market capitalization below that of CryptoPunks, which is now the most valuable NFT collection.
BAYC Floor Price. Source: OpenSea
Franklin, the pseudonymous seller, cited an “IRL [in real life] issue” as the reason for the sales. The collector, long known as one of the largest Bored Ape holders, said he sold the NFTs to pay off loans taken out on the BendDAO lending platform.
To Z, a pseudonymous trader tapped into the Bored Ape market, the price drop driven primarily by one investor underscores the fragility of the collection’s position in the NFT world. “Seeing the effect one user liquidating 20 apes has on the liquidity and bid levels shows that if there were a true capitulation event, it could all come crashing down,” the trader told The Defiant.
Bored Apes rocketed to success seemingly overnight when they launched in 2021. They became the poster child for NFTs, with Paris Hilton showing hers off on late-night television and Rolling Stone magazine putting an Ape on its cover during the height of the NFT craze.
The lower prices of the NFTs are affecting other traders on BendDAO as well — with the value of collateralized Bored Apes lower, the relative value of the ETH borrowed against those assets increased. With 402 of the now-cheaper tokens collateralized on the platform, there are a lot of traders with positions trending toward liquidation.
This has pushed three Bored Apes into the auction process on BendDAO as of April 13. It’s also contributed to pushing more than 100 Apes into the Health Factor Alert List, which means they’re close to being liquidated through the auction process.
Apes up for auction. Source: BendDAO
To Z, the whole drama highlights the number of people borrowing against the NFTs, which are worth about $113,000 apiece as of April 13. “It’s showing how overleveraged the Bored Ape Yacht Club ecosystem is,” they told The Defiant.
Indeed, Z pointed out that traders are using over 1,000 Bored Apes as collateral for loans across three lending protocols, including BendDAO, JPEG’d, where traders are borrowing against 38 Bored Apes, and ParaSpace, where traders are borrowing against 625 of the tokens.
It isn’t just the Bored Ape NFTs that have dropped in value this week. CloneX, another well-known PFP collection, is down 19% in the past 24 hours, according to analytics provider Nansen. BendDAO shows 11 of the tokens as available for liquidation as of April 14.
Pudgy Penguins, another well-traded collection, is down over 9% in the past day, with eight of the tokens up for liquidation on JPEG’d. The downward price action across the board suggests that increasing numbers of leveraged NFT traders may see their positions come under pressure.
Blur Bid Farming
The trader also pointed out that a program by the Blur marketplace has incentivized people to post bids for NFTs close to their floor price. This has made it much easier for traders to unload their assets than is typical — without the help of some incentive program like Blur’s, finding buyers quickly for a large number of high-value NFTs isn’t always possible.
That these bids are essentially from users looking to farm BLUR tokens makes it much more likely that the buyers will turn around and offload any NFT they end up buying onto the next, lower bidder.
This isn’t the first time that drama has centered on BendDAO. Last year, the team behind the project made emergency changes to its protocol as a dearth of bids on NFTs up for auction threatened to leave BendDAO with bad debt.
Amidst the drama, the ETH has rallied over 5% in the past week, making the current 55.5 ETH floor for Bored Apes roughly $113,000. When the floor was 60.8 ETH a week ago, ETH was trading around $1,870, meaning that the floor price in dollar terms has barely budged.
Still, with their debt denominated in ETH, leveraged traders can’t afford to see their Bored Apes drop too much.