If you are borrowing against your bored monkeys, you may want to keep your eyes peeled. Liquidity on leading NFT BendDAO lending platform has undergone a major stress test in the past 24 hours as ETH levels appear to be under pressure. At the time of publication, BendDAO ETH’s reserves have been replenished and are located north of 800 WETH, however the lender has been noticed by many of the lows recorded in the cash deposit at just 5ETH, a dangerously low level for a lending platform. of its nature.
BendDAO quickly emerged on the scene and provided some spice to the NFT conversation, allowing users to leverage their blue-chip NFTs as collateral; let’s take a look at what we know from the lender’s WETH reservations, what we’ve heard so far from the BendDAO team regarding the matter and where we go from here.
Liquidity on high alert: how it happened
The guide of the PROOF collective research, often intuitive @ NFTStatistics.eth first released a report that caught on in Crypto Twitter and the NFT community surrounding the issue, highlighting the topic when BendDAO’s liquidity had dropped to just over 12 ETH:
Ok. Long discussion on the BendDAO situation:
1) They ran out of ETH. There is only 12.5 WETH in the contract.
2) What does it mean? People who have lent money to others through BendDAO to buy leveraged NFTs cannot withdraw their money. About 15,000 ETH was loaned.(1/9)
– NFTStatistics.eth (@ punk9059) August 21, 2022
This conversation sparked broader discussions on how the market reacts; Simple economics tells us that the threat of an impending 100% April would be powerful enough for many users to return collateral and replenish DAO’s cash reserves. However, a downward spiral could take place if overall market sentiment is low on NFTs, as users will be less likely to return their collateral if they believe the market will continue to move lower.
BendDAO responded promptly to liquidation concerns, stating that they “underestimated how illiquid NFTs could be in a bear market when they set initial benchmarks” and put forward an emergency proposal to the DAO in order to improve liquidity metrics. This included adjusting the auction period, the basics of interest rates, liquidation thresholds, and the intention to continue the dialogue on dealing with bad debts. That vote will likely pass.
It's been an interesting ride in recent days for holders of BendDAO's $BEND token. | Source: BEND-USDT on TradingView.com
How did we get here
BendDAO has been the protagonist of many topics of conversation among NFT circles in recent times, seemingly bridging a gap between DeFi and NFT; the big bet here is whether or not BendDAO’s decision making through upcoming proposals will refine the mechanics of the loan process. If so, the protocol is an important part of a growing ecosystem that has yet to demonstrate its ability to withstand major storms, but which may still see significant community engagement and interest.
Featured image from Pixabay, Charts from TradingView.comThe writer of this content is not associated or affiliated with any of the parties mentioned in this article. This is not financial advice.