The BAYC collapse: One man guards the gate, ten thousand liquidates
Written by: 0xLaughing, Cookie, Rhythm BlockBeats< p>
A crypto bear market came quietly before, and then the Luna Thunderbolt Building collapsed. Now the world’s second largest FTX exchange just a few days from Industry leaders have fallen to the altar, and every news continues to stir the nerves of the encryption market, and the NFT market is no exception, but now a dominant Yuga Labs seems to be unable to sit still.
Since the end of the sale of "Monkey Land" in early May, BAYC under Yuga Labs seems to have been It's going downhill. According to NFTGO data, the market value of BAYC has dropped from US$4.298 billion at the end of April to US$1.435 billion billion, a drop of up to 66.6%, and the floor price has also fallen from the highest point of 145ETH. It fell to 48.5ETH a few hours ago, and the drop was as high as 28% in the past 7 days.
BAYC floor price and number of pending orders
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As the leading NFT, BAYC has always been at a high price (even if it is now worth 66,000 US dollars based on the floor price of 52ETH), it is in an encrypted bear market, and almost all NFTs have varying degrees of BAYC holders wanted to sell to cash out, which caused the floor price to drop. This is a very reasonable explanation.
But the transaction data of the last 24 hours is unusual: the floor price fell below 50ETH ( From the K-line chart of the floor price above, it can be seen that there has been a significant drop), the 24-hour drop reached 8.55%, and the transaction volume surged by more than 2700ETH.
The BAYCs who are liquidating the auction in BendDAO
Due to the floor price The decline caused the BAYC mortgaged in the NFT lending platform BendDAO to directly trigger the liquidation auction process, and a large number of BAYC are on the verge of triggering the liquidation auction.
(For the introduction of BendDAO’s lending and liquidation auction mechanism, please refer to the article Use 1 BAYC to receive 2 airdrops? Detailed explanation of "NFT Bank" BendDAO", the current relevant values may be slightly updated)
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At this time, it was discovered that someone "manipulated" the floor price to trigger BendDAO to trigger the auction liquidation. What is even more surprising is that the behind-the-scenes The "Big Short" is Franklin the 7th largest position in BAYC. When FTX crashed, let's talk about the FUD and truth behind this "smashing and arbitrage" incident and Yuga Labs.
Table of Contents
Is the big monkey Franklin a "smashing arbitrage" or a "clearance sale"?
Franklin's response to the question
Conclusion first: there is no " Clearance sale", but "smashing arbitrage".
How did he implement the "smashing and arbitrage" strategy?
Part of the BAYC hung out by franklin
Franklin is a monkey A big player, he held 58 BAYCs before today, making him the 7th largest holder. The abundant NFT holdings gave him room to implement this strategy.
First, Franklin listed a bunch of BAYC at a price close to the floor price, and then received I got a few lower Offers and actually sold a few. In the recent turmoil, this wave of operations looks like a "clearance sale". The surge in pending orders caused panic among other holders, and a lower price than his pending orders appeared, further pushing down the floor price. After BendDAO’s oracle feeds the price, the low floor price triggers BendDAO’s liquidation.
In fact, he only sold 4 BAYCs by receiving low-priced Offers, and 14 BAYCs were used for mortgage loans
Then, he put his 14 BAYC in BendDAO for mortgage loan. With this loan and the ETH obtained by selling the above 4 BAYCs, he bid on the 7 BAYCs that are being auctioned and liquidated on BendDAO in the price range of 43.8 - 44.3 ETH.
Next, There are three situations that can satisfy him:
The borrower repays more than half of the debt within 24 hours of the start of the auction liquidation, At this time, as the first bidder, you can get a reward of 5% of the total debt paid by the borrower. (Based on 45E debt, the reward is 2.25E)
The borrower did not pay off the debt, Franklin won the auction and successfully completed buying low and selling high. (That is, the 44E auction is successful, and then go to the secondary market to sell at the floor price of 50E)
The borrower did not pay off the debt, Franklin did not win the auction, and can collect or continue to hit the floor price until the second situation is completed.
Risk points:
If the floor price has fallen below 44E when he successfully auctions at 44E, a loss will occur, but the probability of this situation lower.
The core is "monkey standard" to do more
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Essentially, Franklin's strategy is short-term bearish but "monkey-oriented" long. If you sell at no loss, you can not only get the "First Bidding Reward" on BendDAO, but also participate in liquidation auctions to sell low and buy high. But if BAYC's floor price cannot rebound, his strategy will not work.
Will it trigger BAYC's "serial liquidation"?
In the short term, it will not trigger BAYC's "serial liquidation"
In DeFi, it is often caused by bad news that the prices of mainstream digital assets such as Bitcoin and Ethereum have fallen, leading to In some DeFi ecosystems, the insolvency of mortgage assets was liquidated. The liquidation and sell-off process triggered a further decline in mainstream digital assets, which also caused more assets to be liquidated due to insolvency. This reciprocation led to the "serial liquidation" of digital assets, and the price entered a "death spiral."
The NFT lending market is different from the DeFi market when it is liquidated, mainly because BendDAO's oracle price feed source.
BendDAO’s Oracle Price Feeding Mechanism
BendDAO’s Oracle The feed price is the floor price data obtained by off-chain nodes from OpenSea, Looksrare, and X2Y2, and the NFT being auctioned and liquidated is not sold on NFT trading platforms such as OpenSea, so it will not lower the floor price of these secondary markets. Feeding the price data to the oracle machine will cause the mortgaged NFT inside the platform to be further liquidated. In other words, the transaction price of BendDAO's liquidation auction will not be fed to itself.
In the long run, if the liquidation auction is not completed in time, it may have an impact on the market outlook< /h4>
The impact of the Luna thunderstorm is far-reaching, and the aftermath of the FTX crash is still unresolved. The run on BendDAO is different, the current "First Bid Reward" is helpful to digest the liquidation auction, that is to say, no one will buy it, but when a large number of BAYCs trigger the liquidation auction on BendDAO and the price is less than two Repeatedly using the same strategy to "smash the market for arbitrage" may cause the floor price to fall further and trigger more liquidation auctions.
In a worse situation, if the floor price quickly falls below the borrower’s debt amount, there is no In the long run, BendDAO may form a pending order wall similar to NFT trading platforms such as OpenSea, reducing the number of other NFT transactions. The liquidity of the platform has caused the floor price of the secondary market to fall further, entering a vicious circle.
Will there be a run on BendDAO this time like last time?
It is also the conclusion first: there is a high probability that it will not.
From BendDAO is insolvent, is NFT finally ushering in the subprime mortgage crisis? "Refer to the serious run on BendDAO in August. At that time, the NFT market was cold, and the floor price of NFT continued to fall. of lenders chose to withdraw a large amount of ETH liquidity from BendDAO's lending pool.
At the same time, the floor prices of many NFTs have quickly fallen below their debt prices, and they are subject to auction Due to the restrictions of the rules (requiring bids must be higher than 95% of the floor price and must be higher than the debt price), most of the NFTs in the liquidation auction are either unable to bid or unprofitable, and the liquidators who have lost the motivation for arbitrage choose to wait and see, which leads to A large number of NFTs did not participate in the auction, further exacerbating the liquidity run.
Overview of blue-chip NFT mortgaged in BendDAO (Source: Dune@cgq0123)
Other pledged in BendDAO There are also many blue chips, but currently only 2 Doodles are being liquidated for auction
At the time, yes The poor performance of the entire NFT market caused the floor price to fall, which led to the lack of confidence of NFT traders; the small amount of bad debts at the beginning of the crisis were not resolved in time, which caused the panic and stampede of the liquidity providers of the lending pool.
As of the publication date, according to Dune data, there are still 31,422 ETH in BendDAO's lending pool, Reserve status is good
But this time, only BAYC has a more serious liquidation auction phenomenon, And after that incident, BendDAO made improvements in mechanism, made adjustments to liquidation threshold, auction cycle, bidding limit, base interest rate, etc., and improved the display pages in the UI interface that may cause misunderstanding and panic. Now One of the key points of "smashing arbitrage" is "the first bid reward" is also one of the improved measures.
Summary: The last run was a "natural disaster" caused by the market and the BendDAO mechanism Man-made disaster", and this BAYC large-scale liquidation auction seems to be caused only by the "big short" Franklin wanting to "smash the market for arbitrage". BendDAO reserves are in good shape, so there will not be a run as severe as the last time.
In addition to BAYC, there are 5 MAYCs that are also in liquidation In the state of auction, a large number of MAYC are on the verge of triggering liquidation. Here comes the question again, behind the liquidation auction of the two flagship projects in the hands of Yuga Labs, which used to be the champion, why are their holders so panicked? Is there something wrong with Yuga Labs?
FUD Moment: Is Yuga Labs Vault on FTX?
FTX collapsed, panic is also spreading to those projects closely related to FTX, NFT leader Yuga Labs bears the brunt of this.
FTX Ventures participated in several investment projects with the most financing and their corresponding financing amounts
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On November 8, CoinDesk published a summary of the most funded investment projects that FTX Ventures participated in and their corresponding financing amounts. Yuga Labs ranked first. According to report, in March this year, Yuga Labs completed a financing of 450 million US dollars at a valuation of 4 billion US dollars, a16z Leading the investment, FTX, Animoca Brands and others participated in the investment.
The huge financing shows that they are closely related, so the money raised by Yuga Labs is placed on FTX ?
The royalties of 18000 ETH went to FTX
Response from Yuga Labs co-founder Garga
In the face of doubts, Yuga Labs co-founder Garga spoke in Discord on November 11 , the entire crypto market is concerned about the serious consequences of FTX and SBF, but Yuga Labs does not have any funds in FTX. He wrote: "By the way, some people in the market asked us if we were affected by the FTX/Alameda incident, Yuga Labs has never used FTX.com, nor has any funds or assets on it. Although FTX was a small investor in Yuga Labs' seed round, it is clear that we received their check a long time ago, which is not will affect our operations.”
address interaction records, found that more than 18,000 ETH were sent to FTX, and 57,473 $APE were also sent to FTX. Obviously, Garga's "safety statement" seems to have lied and is not convincing.
Wylie Aronow, another co-founder of Yuga Labs, responds to the "rumor"
On November 12, Wylie Aronow, another co-founder of Yuga Labs, stated again on his personal Twitter: "The FTX incident has not affected us. Although some of our partners may have used it, we have never used it. We had some funds on FTX, but we moved them out earlier this week.” Meanwhile, Wylie Aronow published According to the records on the withdrawal chain, it was found that 19,666 ETHs were transferred from FTX.US (displayed on etherscan as blockfolio) moved to Coinbase.
Wylie Aronow meant that OpenSea sent royalties to the FTX wallet, not Yuga Labs official for. He also seems to mock those FUD people as "unhinged" and "amateur etherscan detectives".
CT does not accept the account, this is only a few money, where is the bulk?
It's just that "typing proves innocence" seems to be unconvincing
Facts In fact, even if the nearly 20,000 ETH transfer records announced by Wylie Aronow are true, its value is only more than 20 million U.S. dollars, which is far from the previous financing of 450 million U.S. dollars. Compared with the entire national treasury, it is only a drop in the bucket, so where did most of the funds go?
Wylie Aronow said, "Others are in bank accounts and bought into Treasuries. Thanks Care about our friends, we're fine."
The "etherscan detectives" couldn't give evidence , Yuga Labs is only "typing proof of innocence". Compared with CEXs who are pooling money to make Merkle trees to prove that the reserves are sufficient, Yuga Labs' statement seems to be less convincing.
What is the truth?
Last night Yuga Labs announced the acquisition of WENEW Labs and its flagship NFT series 10KTF
More radical "rumors" think that Yuga Labs' announcement of the acquisition of 10KTF at this point in time seems to be "bravery": Look, we still have money to buy, stop your FUD.
If Yuga Labs really lost most of their funds in the "FTX storm" then The panic of BAYC holders seems to be understandable. After all, without financial support, even the leader may not survive the crypto winter.
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