NFT Daily Profile picture
Aug 25 โ€ข 25 tweets โ€ข 17 min read
First, ๐ฐ๐ก๐š๐ญ ๐ข๐ฌ ๐๐ž๐ง๐๐ƒ๐€๐Ž?

@BendDAO is a NFT-collateralized crypto loans supporting #NFT holders to borrow $ETH through the lending pool using NFTs as collateral instantly (40% of the floor price), while depositors provide $ETH liquidity to earn interest.
@BendDAO ๐“๐ก๐ž ๐ซ๐ž๐š๐ฌ๐จ๐ง ๐ฐ๐ก๐ฒ ๐๐ž๐ง๐๐ƒ๐€๐Ž ๐Ÿ๐ฏ๐œ๐ค๐ž๐ ๐ฎ๐ฉ

The Health Factor (๐‡๐…) is the factor used to determine the risk of collateral in Bend

๐‡๐… = (OpenSea Floor Price * Liquidation Threshold) / Debt with Interestsย 
(Liquidation Threshold = ๐ŸŽ.๐Ÿ—)
@BendDAO ๐Ÿ.๐ŸŽ < = HF < = ๐Ÿ.๐Ÿ“ => Risky => ๐Œ๐”๐’๐“ repay the debt

HF < ๐Ÿ.๐ŸŽ + ๐…๐€๐ˆ๐‹ to repay the loan within 48 hours => Liquidation will be triggered, goodbye to your mortgaged NFTs
@BendDAO But I wonder if the Bend team thought about this when the beraaaa market came?

If the floor price drops sharply, then HF will also decrease => More ppl get liquidated => More NFTs will be auctioned to recover the debt.ย 

@BendDAO ...๐‡๐จ๐ฐ ๐š๐›๐จ๐ฎ๐ญ ๐ง๐จ ๐จ๐ง๐ž ๐›๐ข๐๐๐ข๐ง๐  ๐จ๐ง ๐ญ๐ก๐จ๐ฌ๐ž #๐๐…๐“๐ฌ?ย 

At first glance, it looks like we will have a super sale NFTs party - an extremely rare opportunity to accumulate blue chips at lower prices compared to OpenSea floors.
@BendDAO ๐“๐ก๐ž ๐ฉ๐ซ๐จ๐›๐ฅ๐ž๐ฆ ๐ข๐ฌ ๐๐ž๐ง๐โ€™๐ฌ ๐›๐ข๐๐๐ข๐ง๐  ๐ซ๐ฎ๐ฅ๐ž๐ฌ.ย 

Bidders must follow 3 conditions:
- Bids > current debtย 
- Bids > 95% of current OpenSea floors
- Lock $ETH for 48 hours

This leads to more problems:
@BendDAO - When Debt > Floor, as a bidder, why do you have to bid? You can buy another one on OpenSea at floor price (unless you love this #NFT soooo much and this is a chance for you to get it in the easiest and cheapest way, maybe) and if floor keeps dropping, no incentive for u to bid
@BendDAO - Because the movement of floors in 48 hours has a high probability of falling further, especially when we are in a bear market like this, bidders wouldn't dare take such a big risk to lock their $ETH for too long for fear of buying at a higher price.
@BendDAO - Big fishes want Bend to die, so they are waiting for the mass liquidation.

๐–๐ก๐š๐ญ ๐ž๐ฅ๐ฌ๐ž?

- #NFT Volume is at yearly lows => not enough liquidity in the market to absorb
@BendDAO - If Debt (loan + very high interest) > Floor, as a borrower, why do you have to pay your debt? You just simply hold $ETH and buy back your NFTs when the floor continues to drop, or just let them be liquidated and buy another Ape on @opensea
@BendDAO @opensea => Mortgaged NFTs are illiquid + Huge amount of $ETH borrowed (15,000 $ETH) may not be repaid
=> BendDAO ends up holding these NFTs as bad debt.
@BendDAO @opensea => Fearing that the protocol would crash and users wouldn't be able to withdraw their funds,, lenders pulled $ETH out of the lending pools => Bank rrrrrrrun
@BendDAO @opensea Consequence?
To Bend: its wallet had no $ETH left. There was just 12.5 WETH in the contract.

=> Liquidity in lending pool = 0
=> Utilization ratio > 100%, borrowers must pay > 100% interest rates
=> Borrowers have more reason not to repay the loan with that crazy interest rates
@BendDAO @opensea To the NFT market: 272 #BAYCs and 309 #MAYCs were in the BendDAO wallet. Those NFTs account for 82.8% of the total collateral value.ย 

=> The people buying the apes in the auction will get them super cheap, giving them plenty of margin to undercut the floor
@BendDAO @opensea => Massive dump in price could happen
=> BAYC leads the NFT market like Bitcoin because of its huge cap, so it will greatly affect other collections when its floor price is deeply reduced.
=> A liquidation spiral will happen
@BendDAO @opensea ๐“๐ก๐ž ๐ซ๐ž๐ฆ๐ž๐๐ข๐š๐ญ๐ข๐จ๐ง?

Some main emergency changes had been proposed by Bend:
@BendDAO @opensea - Liquidation Threshold: ๐Ÿ“% weekly decrease from ๐Ÿ—๐ŸŽ% to ๐Ÿ•๐ŸŽ%

=> This is the most important change. By lowering the liquidation threshold, they can be assured that under-collateralized #NFTs will be auctioned off before the floor drops enough to enter bad debt territory.
@BendDAO @opensea - Auction Period: Reduced from ๐Ÿ’๐Ÿ– ๐ก๐ซ๐ฌ to ๐Ÿ’ ๐ก๐ซ๐ฌ

=> Limiting the risk of floor price fluctuations, while increasing the advantage for bidders
=> Attracting more liquidity
@BendDAO @opensea - Base Interest Rate: Adjust to 20%ย 

๐‚๐จ๐ฆ๐ฆ๐ž๐ง๐ญ ๐จ๐ง ๐ญ๐ก๐ž ๐ž๐Ÿ๐Ÿ๐ž๐œ๐ญ๐ข๐ฏ๐ž๐ง๐ž๐ฌ๐ฌ ๐จ๐Ÿ ๐ญ๐ก๐ž ๐ฉ๐ซ๐จ๐ฉ๐จ๐ฌ๐š๐ฅ: Good for lenders, but there will be more supply to hit the market. It will be tough for any floors to go up in the near future.
@BendDAO @opensea What happened then?

Things are getting betterย 

- Strong buying demand for Clones/Azuki/MAYC/BAYC at floor prices

- Count of NFTs for auction has gone down due to the increase in floor prices of some blue chips, so now Bend owns low percentage of any collection supply
@BendDAO @opensea - Majority of the NFTs are getting bids

- More $ETH has come into the contract: The BendDAO wallet currently has 31,613.33 $ETH, with 18,901 available,ย which has sent interest rates on borrowed NFTs lower to 4% APR

=> ๐“๐ก๐ž ๐œ๐ซ๐ข๐ฌ๐ข๐ฌ ๐ข๐ฌ ๐จ๐ฏ๐ž๐ซ
@BendDAO @opensea ๐’๐จ๐ฆ๐ž ๐ญ๐ก๐จ๐ฎ๐ ๐ก๐ญ๐ฌ?

- This event occurred not because #NFT should never be used as collateral. The main reason is poorly designed thresholds of #BendDAO

- This is the first example of "NFT x DeFi" having a big impact on top #NFT collections.
@BendDAO @opensea - Everything in the #NFT market in particular and #crypto in general is closely linked, so if one link breaks, there will be a domino effect. Human psychology is the catalyst that makes the effect happen faster.
@BendDAO @opensea - Still don't understand why the heads of #BendDAO lock the barn door after the horse is gone. Admittedly they were excellent at making the right and timely corrections to make the situation better,...
@BendDAO @opensea ...but they certainly knew this was going to happen sooner or later and had a solution in place. So why not make the change sooner when the bear market has lasted more than half a year? Did @BendDAO take advantage of this "sure-to-happen" incident to promote itself?

โ€ข โ€ข โ€ข

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with NFT Daily

NFT Daily Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @NFTDaily

Jan 20
Will LooksRare Steal The NFT Throne From #Opensea?

Despite many rivals are aiming to take the market share away from it, @opensea is still the go-to platform for both beginners and experienced traders to buy and sell #NFT!

Until @LooksRareNFT comes...

$LOOKS #looksrarenft Image
@opensea @LooksRareNFT 1.1/ On-chain Comparison

@LooksRareNFT, which is much younger than #Opensea, already set a record with over $5 billion in Trading Volume in just more than a week!

Even, there were days that #LooksRare has outperformed #OpenSea by more than 400%. Is It impressive? Image
@opensea @LooksRareNFT 1.2/

But wait!

The platform has had more than 18,000 total users since its launch, while more than 300,000 users have interacted with OpenSea since January 10.

Outperforming Opensea volume by more than 400% with 20x fewer users, what is the question here? Image
Read 15 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!


0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy


3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us on Twitter!