Bored Ape Yacht Club might be in trouble...
Uh-oh.
Things aren't looking great for Bored Ape Yacht Club (BAYC) right now.
Dozens of BAYC NFTs that were purchased with borrowed money are now joining Kenny Loggins in the danger zone - getting seriously close to being forcibly sold.
(Which could lead to a cascading sell off).
Here's how it works:
BendDAO is a crypto lending service that allows users to take Ethereum loans out against their NFTs.
Users put their NFT up as collateral and take a loan equal to 30-40% of the collection's floor price (aka the minimum price to purchase one on the open market).
Thanks to the current market downturn, the collection's prices have dropped and users are struggling to pay back their debt.
Which means 45/272 BAYC NFTs with BendDAO loans tied to them ($5.3 million worth) are getting awfully close to being sold off.
...and if that happens, it could result in the sale of the remaining 227.
Here's how that could happen:
45 BAYC NFTs get sold off → the selling pressure lowers the floor price of the rest of the collection → which triggers more loans to be called → which creates more selling pressure → which triggers even more loans to be called...and so on, until prices bottom out.
And because BAYC is the leading 'blue chip' collection of the NFT space, a cascading drop in the collection's price has the potential to affect other projects.
That's the bad news.
The good news is:
BAYC is still in high demand.
A discounted sell off will likely be seen as a great buying opportunity by many in the space, which means the collection's price dip will likely be short lived.
File this one under 'not great, but not the end of the world.'
