August 23, 2022
By Sharan Kaur Phillora
The floor price of the top NFT collection, the Bored Ape Yacht Club (BAYC) series, fell below the floor price of 65.68 ETH for the first time since January 2, 2022.
Here’s what we know:
The position of BAYC is even now the largest collection of NFTs in market capitalization with 656,800 ETH, slightly higher than its closest opponent CryptoPunks that have a total market capitalization of nearly 655,000 ETH. In comparison, 65.5 ETH is its floor price. Nonetheless, the holders of Bored Ape are not fully unlucky, as the fluctuating price of Ethereum (ETH) denotes that the floor price of BAYC is approximately $107,000.
This is considerably lower compared to the beginning of 2022, when the figure of $256,000 was above it. However, it was higher than a low of nearly below $87,000 as witnessed in June. Apart from that, the platform permitted the utilization of loans on BenDAO – a peer-to-peer lending facility – that poses a risk of liquidation because of the dropping floor price of the NFT collection.
BenDAO, with which the consumers are enabled by the clients to get ETH borrowed in return for the non-fungible token, lets the customers request loans of nearly 40% of the entirety of the floor price of a non-fungible token. If the NFT’s floor falls to a level where the health factor of an NFT-backed credit is lower than 1, the respective NFT is positioned in an auction and traded to the top bidder if the debtor has not paid the loan.
The health factor counts as a numeric demonstration of the security of a person’s deposited non-fungible token in return for the borrowed ETH and its original value. At the moment, there are seventy-two Bored Ape Yacht Club non-fungible tokens on the venue that are in the danger zone, as mentioned by Cirrus, an NFT trader. The person spread the news of likely liquidations, with a health factor lower than 1.2, the point where the NFTs may plunge in terms of their price, paving the way for liquidation.
BenDAO noted that the NFTs go through temporary fluctuations normally in the case of their floor price. It added that bluechip NFTs’ consensus was not established in one day, and there is no chance for it to crash in a small time.
The documentation thereof additionally points out that just short-term floating losses have been witnessed by the venue rather than any actual losses. On the other hand, it did not answer the questions concerning the implications of the purchasers’ entry or the NFT’s decline to a level lower than the interest-bearing debt.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.