While Bitcoin has it’s first real ~30% drawdown of this bull cycle, broader crypto has been totally routed and vibes are extremely low. In the goldfish brains of the average NFT/Ordinals degen the past 3 months may as well have lasted a thousand years. Currently most Ordinals collections–even the “blue chip” ones–have a chart pointing one direction since March or April.
For some, that chart is only the beginning. Not content with sitting comfy in spot on these Bitcoin-beta assets, many folks decided to add a little leverage into the mix by loaning against their assets, presumably to buy other Ordinals assets and in particular, Runes. As the Bitcoin market pulled back and took a breather, the floors of these collections collapsed, causing the Loan-to-Value ratio these assets to go into margin call territory.
Let’s take a look at the damage: Using data from @shudufhadzo, analytics at Liquidium, we see that total value loaned against Ordinals assets increased with the Ordinals bull market at the start of the year. Then, as the market began to pull back in March & April and the sure-fire bet of Runes riches at the halving, many users sought to free up capital for Runes degeneracy or to buy their favorite collection on the pullback, and many folks started betting the farm.
Today many of these top collections are down between 60-90%; the liquidations have been numerous. Runes mania quickly subsided, many users burnt through their liquid bitcoin on high fees and speculative minting only to find very few buyers on the other side.
Overall, Liquidium has done over $110 million in total loan volume to-date, with the majority of that activity occurring this past spring.
- The 20 most popular collections account for over 90% of the volume on the platform.
- About 15% of all loans have been defaulted on, or about 18% of total loans by volume.
- That’s over $20 million in loan defaults to-date.
The collections that have been hit the hardest are, intuitively, also the ones that have drawn down the most since their all-time-highs. Runestone and Rune Pups are the highest by total defaults, but those are also “pre-Runes” so there were likely some gamifying mechanics + their post-halving crash. Between Nodemonkes and Bitcoin Puppets alone we see 110 BTC (over $7 million) in defaults. Among the “blue chips” we see OMBs, DeGods, Bitcoin Wizards at the top of the list for defaulted loans.
This may be because these collections are perceived as the most stable long term bets, previously thought to have the lowest chance of falling below the LTV margin call amount. As OMB released Orange Eyes, the overall OMB collection traits experienced considerable fluctuation and likely cause the “higher value” green eyes to temporarily decrease. Winners of “least degen” communities appear to be the Pizza Ninjas and Inscribed Pepes, with under 10% of holders losing their assets to leverage.
But fear not! There is hope! Ordinals data guru @datamonke observes one of the first real bullish signals for several collections. Prices seem to be consolidating right now, buyers have returned (or perhaps the sellers finally left).
This is the Bitcoin DeFi you asked for. This is a natural part of adding leverage to a system: cascading capitulation. However, it’s also notable that in less than 12 months the Ordinals ecosystem already had sufficient tooling & infrastructure to handle 9 figures USD in volume. Huge shoutout to the Liquidium team who have built a platform that works just as well when things are going up as when they are going down, this is no small feat.
See you at $100k Bitcoin and 10 BTC OMB Red Eyes.
