Haters rejoice, Bored Ape Yacht Club plunges to historic low

The Ethereum price floor of NFT’s largest collection plunged to its lowest level since the beginning of the year.

At 65.68 ETH, the bottom price of Bored Ape Yacht Club NFTs has fallen to levels not seen since January 2, 2022.

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.

It’s not all bad news for Bored Ape wearers, though. The fluctuation in the price of Ethereum means that in dollar terms, the bottom price of BAYC today is around $107,000; significantly lower than at the beginning of the year, when it was just below $256,000, but above a low of just below $87,000 recorded in June.

BAYC faces liquidations on BenDAO

To add fuel to the fire, Bored Apes, acquired through loans from peer-to-peer lending service BenDAO, could be liquidated due to the drop in collection price.

BenDAO, which allows customers to borrow ETH in exchange for NFTs, allows users to borrow up to 40% of the floor price of an NFT. If the NFT floor price falls 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 effect of your deposited NFT against the borrowed ETH and the underlying asset.

There are currently 72 Bored Ape Yacht Club NFTs on the platform in the “danger zone”, defined by NFT trader Cirrus, who brought news of the possible liquidations, with a health factor of less than 1.2, risking the risk of the price floor falls leading to liquidation.

BenDAO states in its FAQ that “short-term fluctuations in the floor price of NFTs are normal” and “the consensus on blue chip NFTs is not built overnight and will not fall apart in a short time.

The documentation also states that “the platform only has a temporary floating loss and no real loss“, but leave 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 in May, and 2.57% of BAYC’s collection tied to BendDAO, this is a question that could become urgent.

NFTs Track the Collapse of the Cryptocurrency Market

NFTs like BAYC that operate on the Ethereum network and are sold for Ether (ETH) tend to follow the price of Ethereum.

Following 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.

BAYC’s bottom price, meanwhile, fell 36% from 116 ETH to 65.5 ETH in the same period from May to June.

However, as investors prepare to take advantage of the upcoming Ethereum merger, NFTs have broken away from the second-largest cryptocurrency by market cap.

Between June 19 and August 20, Ethereum fell from an 8-month low of $995 to $1,634 as the BAYC price floor continued to fall.

Zooming out, the NFT market as a whole has not fared well over the past 12 months.

The number of daily sales (in orange) fell, while the dollar value of sales (in white) stagnated.

According to NonFungible.com’s Q2 2022 industry report, “interest has dropped“for NFTs,”geopolitical concernshinder the market.

The liquidity of most collections has decreased significantly, causing the release rate in the secondary market to fallthe report suggests.

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