The NFT sector witnessed a massive decline in interest over the last few months.
The NFT sector observed an alarming decline in interest. NFTs across Ethereum, Solana, and Bitcoin were impacted.At the start of the year, the NFT sector experienced a substantial increase in interest, driven by the introduction of Ordinals and other factors. However, over time, the NFT market witnessed a huge fall in overall market capitalization and volume.across networks such as Ethereum, Bitcoin, and Solana fell materially.
On April 29th, Blur introduced Blend, a flagship lending and borrowing feature seamlessly integrated into its main UI. Users could easily perform three main actions: borrowing against their NFTs, lending their ETH with NFT collateral, and purchasing NFTs using borrowed ETH. To incentivize lenders, daily distributions of BLUR points were offered. Thus, encouraging them to provide loans at high loan-to-value ratios and low annual percentage yields. As a result, borrowers who lacked sufficient capital still took loans, contributing to the accumulation of unhealthy leverage and leading to potential liquidation risks.
This combination of functionalities boosted liquidity for users and encouraged the use of leverage within the NFT market, with Azuki leading the way. At one point, the Blur escrow wallet held 7% of the supply, representing NFTs that were either borrowed against or acquired on leverage, both subject to potential liquidation.
During bullish or stable market conditions, high-leverage behavior thrived. However, when the market took a downturn, problems arose, potentially leading to domino effects as one collection’s significant drawdown affects others. In this case, the most leveraged collection, Azuki, was the first to fall.Another factor that played an important role here was Azuki’s Elemental launch.
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