Difficult times for NFT: multiple projects shut down, lending platforms have serial liquidations and bad debts under the general downtrend

By Nancy, PANews

The NFT market is entering its darkest moment. On the one hand, as the overall market has entered a downturn, NFT has also ushered in a "stop tide", and several NFT projects have announced their closure one after another. On the other hand, the overturn of Azuki's new work triggered a sharp drop in blue-chip NFTs. The lending platform faced a "big test", and a wave of runs came under the risk of bad debts.

Under the bear market, the NFT market has started a "shutdown tide"

The NFT ecology has shrunk sharply and is facing a sharp shrinkage. According to NFTGO data, as of July 6, the total market value of NFT (only Ethereum) reached US$5.95 billion, a decrease of over 30.5% in the past year; the total transaction volume was US$9.87 billion, a decrease of over 68.9%; traders exceeded 1.418 million , a drop of 17.5%. Judging from the data, the large-scale shrinkage of the market value has also caused the continuous loss of NFT popularity and funds.


In the NFT market with a significant head effect, the pressure of the bear market has undoubtedly intensified the trend of "more wolves and less meat", and bankruptcy has become a high-frequency vocabulary in the current NFT field. In recent months, Cardinal, Rentable, Tessera, Abacus, FormFunction, Mint Square, and NFT Trader have all announced their shutdowns, involving tracks such as NFTfi, trading markets, and infrastructure.

Although these NFT projects have received millions or even tens of millions of dollars in financing, such as Tessera has received $20 million in financing from Paradigm and others, and Formfunction has received $4.7 million in financing from iant Fund and others, but due to the macroeconomic downturn and poor business model , difficult to make profits, malicious attacks and other reasons, they can only be forced to close.

For example, Andy Chorlian, the founder of Tessera, once tweeted that the team spent a long time carefully analyzing the possible market conditions, company structure and financial situation, and believed that this was the best choice for the team and investors, and said, "When we really When digging into Escher's economic model, we found that the profitability we needed to achieve (compared to the time and resource cost of scaling there) might not make good business sense."

Cardinal once issued a statement saying, “Since we started construction 18 months ago, we have done our best to deal with this extremely difficult macroeconomic environment. Pursuit. While we’ve seen some real use for our staking, leasing, and identity products, we still feel like they’re stuck in the context of the crypto maximization community. We had hoped that other industries around the world would begin to adopt them on a larger scale Adoption of blockchain technology, but so far it still feels remote.”

The platform is "covering the bottom line" for bad debts, and the Azuki and BAYC series have become the "hardest hit areas" for liquidation

Recently, as a blue-chip representative project, Azuki's unsatisfactory performance undoubtedly gave NFT a blow to its confidence. According to NFTGO data, in the past 7 days, the blue chip project index fell by about 11.2% in 7 days. According to Blur market data, popular projects including BAYC, Azuki, MAYC, DeGods, Milady, Pudgy Penguins, etc. have seen double-digit declines in the past week, especially the Azuki series.


Under the general decline in the market, a large number of blue-chip NFTs have fallen into a liquidation spiral, and due to insufficient market liquidity, many mainstream lending platforms have varying degrees of bad debts, and funds have fled in panic. However, most lending platforms officially stated that they can cover bad debts.

BendDAO

BendDAO is a peer-to-pool NFT mortgage lending agreement, which adopts the liquidation mechanism of ordinary auctions. According to BendDAO data, as of July 6, the platform had 12.8 ETH floating loss bad debts, mainly caused by 8 Azuki whose outstanding debts were higher than the floor price. At the same time, according to DeFiLlama data, as of July 6, BendDAO Lending TVL reached US$32.2 million, a drop of more than 69.6% in the past 7 days.

To this end, the BendDAO community initiated the proposal of "Using treasury funds to participate in the agreement NFT auction", intending to use its DAO treasury to participate in the agreement NFT auction to enhance user confidence and help maintain market stability. At present, the proposal has been passed with a high vote rate of 97.11%. As of July 6, the BendDAO treasury consists of 52 ETH and 327,000 USDT assets, which is enough to cover potential floating losses.

Paraspace

ParaSpace is also a peer-to-pool NFT lending agreement, using a hybrid Dutch auction liquidation mechanism. Recently, Paraspace recently announced the suspension of Azuki loan liquidation services, and said that this move aims to give users more time to replenish liquidity, repay loans and improve health, and Paraspace has sufficient reserve funds to deal with sudden situations. The current bad debt At about $100,000, the ParaSpace Reserve Fund is fully covered. According to Paraspace’s official website, there are currently 13 NFTs on the platform that are suspended for liquidation, all of which come from Azuki.

According to DeFiLlama data, as of July 6, ParaSpace Lending TVL reached US$55.55 million, a drop of more than 19.8% in the past 7 days.

Blend

Blend is a peer-to-peer lending model. As the largest lending platform, Blend includes projects such as BAYC, Azuki, MAYC, Otherdeeed and Beanz, all of which have bad debts, among which Beanz (29), Remilio (18) and BAYC (12) are more obvious. According to DeFiLlama data, as of July 6, Blur Lending TVL was 24.85 million US dollars, a drop of more than 43.2% in the past 7 days.

From the current point of view, Blur has the most obvious level of bad debts, and the Azuki and BAYC series of NFTs whose prices have plummeted recently have the most liquidations.

In short, under the emergency of liquidity, the current NFT market is facing a new round of stress tests and survival tests.