Research Summary
This report analyzes the 25 worst NFT loan liquidations, highlighting the significant risks associated with borrowing against NFTs. It details the debtor losses, which ranged from $26,756 to $194,861, and the impact on various NFT collections such as BAYC, Autoglyphs, and Wrapped CryptoPunks. The study also explores the timeline of these liquidations, emphasizing that poorly-managed loans can lead to losses at any time.
Key Takeaways
Worst NFT Liquidations: Debtor Losses
- Debtor Losses Range: In the 25 worst NFT liquidations, debtors lost $26,756 to $194,861 each, with losses ranging from 15.3% to 91.3% of their NFT collateral value.
- High Risk of Liquidation: Borrowing against NFTs carries significant risks, and debtors could have received more crypto from selling their NFTs instead of borrowing with the risk of liquidation.
- Widespread Liquidation Cases: Almost all of the 25 worst NFT liquidations took place on NFTfi, affecting a range of debt amounts and NFT collections.
NFT Collections with Worst Loan Liquidations
- Bored Ape Yacht Club (BAYC): 10 of the 25 worst NFT liquidations were BAYC-backed loans, resulting in $754,793 in debtor losses.
- Other Significant Collections: Larva Labs’ Autoglyphs, Wrapped CryptoPunks, and Art Blocks also experienced significant liquidation losses.
- Extreme Cases: In some instances, debtors lost more than 10 times what they had borrowed, highlighting the extreme risks involved in NFT loans.
Timeline of Worst NFT Liquidations
- Spread Over Time: The 25 worst NFT liquidations occurred between October 2021 and June 2023, showing that debtors risk losses from poorly-managed loans at any time.
- Peak Periods: Q2 2022 and Q2 2023 recorded the highest debtor losses, with significant losses also in April and June 2022.
- Varied NFTs Affected: The liquidations affected a diverse range of NFTs, including BAYC, Autoglyphs, CryptoPunks, and Azukis.
Actionable Insights
- Understand the Risks: Borrowing against NFTs comes with significant risks, including potential losses that can exceed the borrowed amount. Careful consideration and risk assessment are essential.
- Monitor Market Conditions: The report shows that liquidations can happen at any time, regardless of market conditions. Continuous monitoring and proper loan management are crucial to avoid losses.
- Choose Collateral Wisely: The choice of NFT as collateral can greatly influence the risk of liquidation. Collections like BAYC have been hit the hardest, so understanding the market dynamics of specific NFTs is vital.
