BendDAO running out of funds amid fears of souring debt

2 years ago

NFT level BendDAO experienced a slope tally betwixt August 19 and August 21 arsenic implicit 15,000 Ethereum (ETH) were withdrawn from its declaration wrong 48 hours.

While you were dormant the BendDAO slope tally yet happened

15 wETH ($25,081) near successful the wallet that had 18,000 ETH ($29,160,000) successful it conscionable 48 hours ago

Still 14,500 wETH owed to lenders….

Absolute shitshow pic.twitter.com/RKkdqVAVIf

— Cirrus (@CirrusNFT) August 21, 2022

Etherscan data shows that the declaration present holds lone 151.52 Wrapped Ethereum, astir $235,000.

NFT liquidation fears

BendDAO has been successful the heavy of the quality aft reports that respective bluechip NFT holders had borrowed against their NFTs connected the platform, spreading liquidation fears connected crypto Twitter.

Co-founder of Benddao

About to get liquidated by Benddao

pic.twitter.com/DvrNLI7lcc

— Erick (@EB7) August 19, 2022

According to an August 19 Twitter thread from Double Q, the liquidation could hitch disconnected arsenic overmuch arsenic $55 cardinal from the space.

1/ How @BendDAO and BAYC indebtedness liquidation tin nuke the full NFT market

30,300 ETH ($55m) worthy of NFTs connected the line

A indispensable work thread to support yourself

— doubleQ (@xDoubleQ) August 19, 2022

A Twitter thread from NFTStatistics stated that users who lent ETH to others couldn’t retreat their funds due to the fact that determination was not capable wealth successful BendDAO’s contract. According to him, the level lent retired astir 15,000 ETH.

Ok. Long thread connected the BendDAO situation:

1) They've tally retired of ETH. There is conscionable 12.5 WETH successful the contract.
2) What does this mean? People who lent wealth to others via BendDAO to bargain NFTs connected leverage can't propulsion their wealth out. About 15,000 ETH was lent.

(1/9)

— NFTStatistics.eth (@punk9059) August 21, 2022

More NFTs could onshore connected the auction block if borrowers cannot repay the involvement connected their debts, particularly arsenic the level terms continues declining.

No bids connected debt-ridden NFTs

Meanwhile, astir NFTs that person defaulted connected their loans person not seen a bid. For context, lone 4 of the 17 Mutant Apes connected auction person received an offer. Other collections similar Bored Ape, Doodles, and CloneX cumulatively person 9 bids for the 28 NFTs connected auction.

5) What does that mean for my NFTs?

It depends. Right now, the bulk of NFTs that person defaulted person nary bids

13/17 MAYC
5/9 BAYC
8/11 CloneX
6/8 Doodles

full # of NFTs for auction with nary bid/total # of NFTs for auction (so, for example, 4 MAYC person bids)

(3/9)

— NFTStatistics.eth (@punk9059) August 21, 2022

The deficiency of bids is mostly owed to the BendDAO requirements. First, the connection has to beryllium supra the indebtedness and the OpenSea level price. Secondly, anyone bidding has to fastener up their ETH for 48 hours.

These 2 requirements person discouraged many, particularly arsenic the indebtedness is sometimes higher than the level price.

Bad debt

Meanwhile, a Twitter idiosyncratic has highlighted that BendDAO is astatine hazard of ending up with atrocious indebtedness if the level terms of these NFTs proceed to decline.

7/ So, we tin spot that ONLY semipermanent hodl liquidators are apt to bid. If nary 1 bids, and the level terms keeps going lower, this becomes atrocious indebtedness for @BendDAO . Benddao volition extremity up Hodling the NFT. There is nary cascading liquidations! Great news, but there’s atrocious quality too.

— TradFiWhale.eth (@TradFiWhale) August 21, 2022

In specified a case, it could make a vicious rhythm wherever ETH lenders volition vie to withdraw, leaving the protocol with NFTs worthy beneath the indebtedness and lenders incapable to withdraw.

The idiosyncratic recommended timely liquidations of 1 hr alternatively of the existent 48-hour window.