Things could get real ugly, real fast for some of these people.
It's not a great time to be a Bored Ape Yacht Club (BAYC) right now, or really anything crypto-related. However, the exorbitant prices in these JPEG communities are getting hit especially hard as the price of these plummet as much as 80% in just 6 weeks. Things might not be getting any better either, as dozens of BAYC are getting close to the liquidation point after they over-leveraged themselves by taking out a loan on a popular lending site called "BendDAO." The site allows users to get a loan of up to 40% of their NFT collection's value, which nearly 3% of the entire BAYC has since done. The implications of this means there are dozens of holders of this collection about to be on the line for as much as $5.3 million.
This might not seem like much at first, but much of the current woes in the crypto world are due to this exact crypto-related leverage. BlockFi, Celsius, and Voyager were all connected to Three Arrows Capital, a now-defunct crypto hedge fund. The company essentially took out massive amounts of debt they couldn't realistically handle from several different lenders, then tried investing it. When this obviously terrible strategy didn't work, it brought several others down with it. This is also similar to what happened with several banks and mortgage lenders in 2008, so it's nice to see we've learned nothing.
BAYC is the largest NFT collection on the planet and generally serves as an index for the industry. What Bitcoin does for Crypto, BAYC typically does for NFTs. So, if large portions of the base start getting margin called, that could very well mean it cascades into more margin calls across other platforms, projects, etc. This could lead to not only a number of NFT projects failing but other lenders margin-calling and going under, which ultimately collapses large portions of the market.
Given how shaky the overall market still is, and the majority of people still not convinced on NFTs, it's hard to see a light at the end of the tunnel for these people. Then again, NFTs are already considered highly speculative, so taking out millions of dollars in loans against them might not have been the smartest course of action. As always, what do I know, I can't afford to throw house money at a monkey picture (then again, it seems most of these people can't either?).