LD Capital: Summary of NFT Lending Platform Updates

LD Capital: NFT Lending Platform Updates Summary

LD Capital has written a research report discussing whether the Azuki incident has caused NFT lending platforms to go bankrupt. Its researcher, Yuuki, has summarized the key points of the report and updated the current status of NFT lending platforms.

The logical chain and subsequent inference of the events that occurred during the significant drop in collateral prices of NFT lending products such as BendDAO and BlockingrasBlockingce point pools are as follows: Collateral prices drastically drop → Large amount of collateral is liquidated → Platform’s bad debt risk increases → Deposit pool shrinks → Passive increase in deposit and lending interest rates → Users repay and retrieve collateral (or market confidence is restored, leading to deposit growth). In historical observations, every time NFT prices drop to the concentrated liquidation range of lending agreements, a price support is formed because this price range of lending agreements bears bad debt risks and digests a large amount of selling pressure. Currently, there is also a lack of channels for profiting through shorting NFT lending agreements. Therefore, the price of NFTs usually forms strong support at this price range.

After the Azuki incident caused a sharp drop in the floor price of blue-chip NFTs, BendDAO faced bankruptcy on July 3 (the first bad debt, historical high auction loan balance far exceeding national treasury funds), TVL was cut in half, and the crisis was resolved with the recovery of NFT prices. A large amount of lending in BlockingrasBlockingce exists in the form of USDT rather than ETH. In the past six months, the decline in the exchange rate of blue-chip NFTs against USDT was smaller than that against ETH (ETH price increase), which caused the overall TVL of the BlockingrasBlockingce platform to be lower than that of BendDAO before the incident. Therefore, the impact of this incident on BlockingrasBlockingce was smaller, with a 23% decrease in TVL.

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The main collateral in Jpegd is CryptoPunk (with a small price drop), and Jpegd lends and borrows through the form of CDP to cast pETH and pUSD. The protocol does not have a deposit pool, so Jpegd was basically unaffected by this incident, with a 9% decrease in TVL. It is worth noting that Jpegd may modify its economic model to introduce the function of casting pETH with collateral JPEG tokens. Currently, Jpegd has two Guage pools in Curve, which are pETH/ETH (TVL 21.27m, APY 22.38%) and Jpeg/ETH (TVL 4.22m, APY 55.64%). Due to insufficient demand for NFT collateral lending, pETH is long-term positive. The introduction of JPEG collateral casting pETH function by Jpegd protocol can release the lending liquidity of JPEG, alleviate the positive surplus of pETH, and share the governance resources of the protocol more to JPEG holders (JPEG collateral casting pETH and ETH combination LP mining does not need to worry about impermanent loss risk).

Reference: https://twitter.com/Yuuki_7788/status/1678207351868760064

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