Home Ethereum NFT Lender BendDAO’s Liquidity Passes A Test As ETH Reserves Fall

NFT Lender BendDAO’s Liquidity Passes A Test As ETH Reserves Fall

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NFT Lender BendDAO’s Liquidity Passes A Test As ETH Reserves Fall

If you’re borrowing against your Bored Apes, you might want to keep your eyes peeled. Liquidity on leading NFT lending platform BendDAO has come under a major stress test over the past 24 hours as ETH levels appear to be under pressure. At the time of publication, the BendDAO ETH Reserves have been replenished and are north of 800 WETH, but the lender has been noted by numerous dips in the liquidity vault at just 5ETH – a dangerously low level for a lending platform of its nature.

BendDAO quickly appeared on the scene and spiced up the NFT conversation, allowing users to leverage their top-notch NFTs as collateral; Let’s take a look at what we know about the lender’s WETH reserves, what we’ve heard so far from the BendDAO team about it, and where we go from here.

Liquidity on high alert: how it happened

The research leader PROOF Collective, often intuitive @NFTStatistics.eth first published a report that gained traction on Crypto Twitter and the NFT community surrounding the issue, highlighting the topic when BendDAO’s liquidity fell just above 12 ETH:

This conversation sparked broader discussions about the market reaction; simple economics tells us that the threat of an imminent 100% APR would be strong enough for many users to return collateral and replenish the DAO’s liquidity reserves. However, a downward spiral could continue if general market sentiment is low on NFTs, as users will be less inclined to surrender their collateral if they believe the market will continue to decline.

BendDAO responded quickly to liquidation concerns, expressing that they “underestimated how illiquid NFTs could be in a bear market when setting initial parameters” and offering an emergency proposal to the DAO in order to improve the liquidity parameters. This included adjusting the auction period, interest rate bases, liquidation thresholds, and the intention to continue the dialogue on resolving bad debts. This vote is likely to pass.

It's been an interesting ride in recent days for holders of BendDAO's $BEND token. | Source: BEND-USDT on TradingView.com

How we got here

BendDAO has been a hot topic of conversation among NFT circles lately, 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 lending process. If so, the protocol is an important part of a growing ecosystem that has yet to prove its ability to withstand big storms, but could still see substantial community engagement and interest.

Featured image from Pixabay, Charts from TradingView.com

The writer of this content is not associated or affiliated with any of the parties mentioned in this article. This is not financial advice.

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