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BendDAO running out of funds amid fears of souring debt


NFT platform BendDAO experienced a bank run between August 19 and August 21 as over 15,000 Ethereum (ETH) were withdrawn from its contract within 48 hours.

Etherscan data shows that the contract now holds only 151.52 Wrapped Ethereum, roughly $235,000.

NFT liquidation fears

BendDAO has been in the thick of the news after reports that several bluechip NFT holders had borrowed against their NFTs on the platform, spreading liquidation fears on crypto Twitter.

According to an August 19 Twitter thread from Double Q, the liquidation could wipe off as much as $55 million from the space.

A Twitter thread from NFTStatistics stated that users who lent ETH to others couldn’t withdraw their funds because there was not enough money in BendDAO’s contract. According to him, the platform lent out around 15,000 ETH.

More NFTs could land on the auction block if borrowers cannot repay the interest on their debts, especially as the floor price continues declining.

No bids on debt-ridden NFTs

Meanwhile, most NFTs that have defaulted on their loans have not seen a bid. For context, only 4 of the 17 Mutant Apes on auction have received an offer. Other collections like Bored Ape, Doodles, and CloneX cumulatively have nine bids for the 28 NFTs on auction.

The lack of bids is mostly due to the BendDAO requirements. First, the offer has to be above the debt and the OpenSea floor price. Secondly, anyone bidding has to lock up their ETH for 48 hours.

These two requirements have discouraged many, especially as the debt is sometimes higher than the floor price.

Bad debt

Meanwhile, a Twitter user has highlighted that BendDAO is at risk of ending up with bad debt if the floor price of these NFTs continue to decline.

In such a case, it could create a vicious cycle where ETH lenders will compete to withdraw, leaving the protocol with NFTs worth below the debt and lenders unable to withdraw.

The user recommended timely liquidations of 1 hour instead of the current 48-hour window.

Bored Ape, CryptoPunk floor price slides

Available data from NFTpricefloor showed that the floor price of Bored Ape dropped by over 13% within the last seven days.

According to the data, the collection’s NFTs traded for as low as 65.67 ETH on August 20.

Other top collections like CryptoPunks and Mutant Ape also slid by 5% and 7.7%, respectively.

Meanwhile, CryptoPunks’ NFT floor price briefly flipped that of Bored Ape on August 21, according to CoinGecko.





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