Liquidation fears could tank the NFT market even further.
The crypto bear market may be bad, but the NFT bear market has been brutal.
That is becoming increasingly evident by a dropping floor price of Bored Ape Yacht Club NFTs, which hit lows not seen since the start of the year. At the time of writing, the floor price is at 70 ETH, down significantly from over 150 ETH in May 2022. Coupled with ETH's dropping value in USD terms, it means that BAYC NFTs have lost over 70% of their value from all-time-highs.
The situation may become even more dire if Apes acquired by P2P lending service BenDAO are liquidated.
The NFT lending service allows holders to borrow up to 40% of an NFT's floor price value. If a loan's "health factor" drops below 1, its loan-to-value ratio exceeds 40%, and the loan is not repaid in time, the NFT is placed in a 48-hour auction.
According to Twitter user Cirrus
, a significant amount of Apes are currently facing liquidation risk, which could prompt a liquidation cascade for the wider NFT market.
It remains to be seen what would happen if the floor price really were to drop even further. According to BenDAO documentation, "the platform only has a temporary floating loss and no actual losses." This does not address potential concerns over a liquidation cascade in the market.
The NFT market has been in a brutal bear market, with trading volume down over 80%, according to information by The Block
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