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Yuga Labs Bored Ape Yacht Club NFTs bounce hard after liquidation cascade

Yuga Labs's Bored Ape Yacht Club NFTs price surged 20% after huge liquidation cascade clears leveraged positions, marking a potential bottom.

Table of Contents

Introduction

At the time of writing, the floor price of the BAYC collection is 35.5 ETH (roughly 66.000$), after touching the 2 years lows below 30 ETH (data from https://nftpricefloor.com/bored-ape-yacht-club). That’s a surge of above 20% from the bottom.

But the OG apes are not the only NFTs bouncing hard: the Mutant Ape Yacht Club registered a +19.13%, and the Bored Ape Kennel Club a +27.27%. Also, the NFTs outside the Yuga family are experiencing a sharp bounce, but… what is happening here?

 

 

 

What characteristics had this move?

An experienced trader could’ve predicted this move up. Most of the Apes (90%) selling in the 30ETH zone, were bought during the liquidation cascade by liquidity providers and market makers that have no interest in holding the assets, but rather profiting from the liquidation inefficiency.

As the NFT market is more illiquid, and as these NFTs are very expensive, the market takes more time to close the positions of the “market makers”, with respect to the futures market, where such a move is usually made within hours.
In fact, in the 30ETH zone, we could notice only a small minority of NFTs with a very low previous sale price (hence, long-term holder taking profit), or a very high sale price (hence, holder cutting the loss).

 

At the time of writing the sell-side wall is very thin, with only 50 NFTs to be bought for the floor price to reach 40 ETH back, and around 100 NFTs for the 45 ETH floor.

 

 

Wait, leverage trading? What is Blend?

Trading crypto on leverage is risky.

Trading NFTs on leverage is probably even more riskier.

In short, thanks to Blend by blur.io, you can buy an NFT with just 1/10 of the capital and pay back the rest when selling the item.

However, if the floor price of the collection decreases, the NFT will be liquidated, dragging the price down.

 

 

What happened?

Citing Cirrus (https://twitter.com/CirrusNFT):

“Over the last few days [first days of July], we've seen the worst liquidation cascade in the history of NFTS. [...] There were 1244 Liquidations in the last 96 hours (This excludes forced sellers that sold their collateral to repay loans before they were underwater) For reference on an average day over the last year, you'd see 10-15 NFT loans liquidated [...] the rate of liquidations has slowed drastically over the last few hours and there aren't a crazy amount of underwater loans left.
Think we're done with those sharp one-day moves down that we've seen over the last few days.”

 

 

 

How to use blend? How to check the liquidation prices of NFTs?

You can find blend inside blur.io. Each selected NFT collection has its own lending market, where traders can lend ETH in exchange of blur points (paid by the platform) and interest (paid by the borrower).

Interestingly, most of the lendings up to 3x leverage have a 0% APY, because the incentive of the blur points (that you can earn by bidding as well) are compensating the loans.

 

As you see from the upper figure, as of now it would be possible to buy an ape by paying 12.44ETH, and borrowing 23.01ETH for free!

 

In order to check the status of the market, you can find in green all the low APY loans (0% up to 50%), which are considered not at risk of liquidation, in orange the loans with high APY (high risk of liquidation), while in grey the loans on the verge to be liquidated.

The previous chart and the following represents the current situation, with only about 100 apes being leveraged, most with safe liquidation prices below 27/28 ETH.

 

 

 

Conclusion

As for the opinion of the writer, this liquidation cascade signed the bottom of the NFT market for at least months.

Especially for the Bored Apes, coming from highs of 170 ETH+ per NFT, having incredible partners (Gucci, Adidas among others) onboard, having incredible personalities (Justin Bieber, Mark Cuban, Snoop Dogg among others) onboard, this move up could just be the beginning of a resurrection.

Article by Paolo Montemurro – Founder Blockchain Army
https://twitter.com/themontedev

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