[Coinlive Original] Exclusive data reveal: Why BendDAO will not become the fuse of the NFT market crash

The NFT lending platform BendDAO has been making headlines in recent days. The lending services offered by the platform are nothing new, it's just that the market is suddenly concerned about their running out of liquidity. From concern to heated discussion, the currency circle gradually began to worry about whether BendDAO would drag down the entire NFT market and trigger a major event similar to the 2008 subprime mortgage crisis. To be honest, I don't think this is likely to happen, let's see what I can tell with the data.

BendDAO is arguably one of the most generous lenders among its peers, with the platform offering loans of up to 40% off the floor price for selected series of NFTs. Just like banks in the real world, BendDAO only accepts valuable assets as collateral, namely blue-chip NFT projects, such as Boring Ape (BAYC), Mutant Ape (MAYC), CloneX, etc. For example, assuming that the floor price of the Boring Ape NFT held by Mr. A is 130 ETH in April, then he is eligible to lend up to 52 ETH to BendDAO immediately. Of course, borrowing comes with liquidation risk. If the floor value of the collateral falls sharply, they will be subject to liquidation. In order to make NFT mortgagers feel at ease, in addition to designing a set of exclusive methods to calculate the floor price, BendDAO also provides a 48-hour liquidation protection measure if the collateral is unfortunately liquidated. With these, mortgagors don’t have to worry about their collateral being liquidated due to a sudden drop in the floor price, but what they need to worry about is whether these NFTs can continue to increase in value in the future, rather than a slow and painful 45-degree slope. fall.

As time goes by, the bulls have turned into bears, the floor price of NFT keeps falling, but the interest on loans keeps increasing, and the day when the mortgaged assets are liquidated is within reach. In BendDAO's lending protocol, the "health factor" defines what liquidation is. If the coefficient is lower than 1, the mortgaged NFT will be liquidated. Through the website's alert list, everyone can track everything that happens on the lending platform.

As shown above, Bored Ape #102 is on the brink of reckoning. According to calculations, if the floor price of the boring ape reaches 66.5 ETH, which is a 2% drop, then the ape can wait to welcome a new owner.

Fortunately, the mortgagor has repaid part of the debt (4.81 ETH), #102 ape said it is safe for the time being, but there are not many good days left. BendDAO recently passed a proposal for adjustments to liquidation thresholds (or thresholds), auction durations, and benchmark interest rates. Effective September 6, the liquidation threshold will be lowered to 80%, while the auction period will be shortened to 24 hours. Not only that, but the final adjustment target of the platform is 70% and 4 hours respectively. If the BendDAO community reaches a consensus, these changes will definitely change the rules of the game.

When the liquidation threshold is adjusted to 80%, the health factor immediately drops below 1. In the case of Boring Ape #102, the mortgagor's previous efforts to repay the debt were almost in vain because he still needed to come up with more money to fill the hole. He needs to pay another 2.26 ETH to bring the health factor back to 1. So what will happen if the liquidation threshold is adjusted to 70%? Let's find out.

At this time, to maintain the health coefficient, you have to repay an astonishing 12.15 ETH! If you are one of BendDAO's NFT collaterals and have taken out a huge ETH loan, it may be time to pay attention to liquidation risks. As long as the health coefficient is lower than 1.286, the collateral will face liquidation risk when the liquidation threshold is reduced to 70%. As of the time of writing, BendDAO has a total of 787 collateralized NFTs, of which 197 have a coefficient lower than 1.286. So, as long as the proposal is passed, a quarter of the collateral in the platform will be at risk.

The 787 NFTs held by BendDAO are worth as much as 21,735 ETH, while the total market value of these NFT series is 1,891,587 ETH, and BendDAO only holds a 1.1% share. It should be noted that the 197 NFTs at risk mentioned above are worth only 7,549 ETH, which is even lower. In short, judging from the current scale of BendDAO, it is really difficult to bring down the entire NFT market.

Author: [Coinlive] Nell