Machi Big Brother can crash the NFT market in one click.
Here's how and why he should...
Machi Big Brother is the chief Season 2 Blur bidder. They've bid thousands of ETH across top collections and earned a whopping ~4% of total bid points.
Everything was going great for Machi until two giga Chads, Mando & OSF, stepped in with an unexpected move. They sold 72 BAYC into the thick BAYC bid wall... predominantly to Machi.
NFT Twitter celebrated the move and used it as an example of the new "deep" liquidity NFT market. The floor has held up decently and only dropped a couple of ETH. But, $10M in Blur bid liquidity evaporated and the bid farming dynamics changed.
Machi completely ran dry yesterday and sent millions of $s back to his Blur account. He's continued to buy NFTs through bids, dumped some NFTs, and got his balance back over 1k ETH. Machi still has some bids to sell into... for now.
Blur bid liquidity is dominated by whales. Many of these whales have accumulated huge bags and are losing 0.5% in fees on every flip. One whale may decide the risk of losing $ on NFTs exceeds the benefit of Blur points and then...
They'll dump their bag onto others farmers. These farmers will likely do the same and cause a cascade of bids accepted and listings undercut. The pattern is already beginning with Machi quietly taking bids on 6 BAYC, 36 MAYC, and 42 Deeds.
It's a prisoner's dilemma between the top traders where Machi has the most to lose. All traders may cooperate and we won't see a crash... But, will reward farmers really cooperate instead of defecting to maximize their profitability?
The crash may remove liquidity faster than anticipated because Blur pools allow bidders to exceed their total account balance in bids across multiple pools. For example, Blur has $127M TVL but the bid depth across just BAYC, MAYC, and Otherdeeds is $144M.
Many top traders have their full Blur balance allocated across multiple pools. Meaning, if Machi dumps 70 BAYC, it'll remove significant bid depth from other collections like MAYC and Azuki. Farmers will need to hodl the NFTs and add new ETH to keep bidding...
The market was propped up by these bids and is set to crash if they're removed. The organic buy levels for the bid-farmed collections are likely at or below pre-pump levels (5-50% lower for most top 20 volume collections).
The NFT market could potentially just be rising but the number of unique traders is flat and NFT collections not on Blur, like Art Blocks and ERC1155s, have all underperformed.
Considering all of this... here are Machi's options:
Market dump them
Hodl the risk & farm listings rewards
Try to find an OTC deal
Continue injecting $ to fund this cycle
Which should they do?
The best thing for the market is slowly selling and farming rewards or taking an OTC deal... hoping another whale doesn't crash it first.
OR...
Machi can dump them in one go, crashing the floor, giving him liquidity, and allowing him to continue farming with his remaining BAYC.
Ironically, Franklin was probably the best OTC candidate but he's removing BAYC from bend rn... likely to sell too. Ultimately, whichever big players moves first, if any do, will lose the least. It seems highly probable one will defect soon and if they do.
Top-tier NFT holders and Blur bidders should be on high alert. The risk/reward has shifted massively in the last 2 days and farming bids near the floor seem like a low reward/risk bet. Personally, I removed Blur bids near the floor and opened up a BAYC short on NFT Perp.
In summary:
Blur bid farmers lost $10M in liquidity
The market will likely crash if any big farmers dump
Blur liquidity is spread across pools which will accelerate a crash
Bids near the floor may be a risky play rn if you don't want them to hit
That's a wrap! Thank you so much for reading.
If you made it this far, I'd love to get your take on... What will Machi and the other top traders do next?