Such crises raise concerns about NFT volatility and valuation, which could complicate the ETF’s approval.
Pudgy Penguin, a well-known NFT collection, is facing a dramatic downturn as the floor price of the NFT fell by 19.6% over the last seven days as per CoinGecko. This movement has sparked intense volatility and forced liquidations on the Blur NFT lending marketplace. It has been observed that influencers and market analysts are warning about cascading defaults that can draw in significant uncertainty.
The current situation is risky as 175 Pudgy Penguins loans are underwater and in active auction on Blur. This gives a clear indication that the borrowers are not able to repay the loans and the lenders have decided on selling the collateral NFTs on the open market.
Also, there are another 50 loans that are at 90% Loan-to-Value (LTV). This means that these 50 loans are in a risky position, and if the asset prices move slightly against them, they will be liquidated.
If no buyer rescues the market by purchasing these NFTs during its liquidation, lenders could be stuck holding them instead of getting their money back. In the past, there have been investors who stepped in and stopped the prices from crashing any further by simply buying large amounts of these NFTs. This observation was made by an NFT expert Golden Bronny on X (formerly known as Twitter).
Another NFT expert Cirrus NFT highlighted the extent of the risk. In his post on X, he highlighted that around 120 Pudgy Penguins are poised to default within the next 12 hours. This indicates that almost $6.5 million NFT value may soon shift hands from borrowers to lenders, most of whom did not intend to own these “fat cartoon birds” long-term.
On the other hand, the Bored Apt Yatch Club (BAYC), another top blue chip NFT collection looks like it is holding things much better than Pudgy Penguins, BAYC has only 3 NFTs worth less than their loans and 358 close to 90% LTV. This makes the overall risk lower than Pudgy Penguins as per Golden Bronny.
The BAYC floor price has been resilient all these years and the price has been trending a little as cautious buyers step in to stabilize the market. If there is a continued buying activity, it could keep the situation contained for BAYC holders and make the correction notably less severe for them.
The forced liquidations on Blur will have a pressure on the Pudgy Penguins NFT floor price. As of now, the floor price of the NFT stands at 10.28 ETH ($45,450) which has dropped 4.1% in the last 24 hours and has come down by 19.6% in the last 7 days as per CoinGecko.
These liquidations can also negatively affect the investor confidence in the PENGU token and can cause short-term price drops. As of now, the price of PENGU token stands at $0.03083 which is down by 3.6% in the last 24 hours.
The Canary Capital PENGU ETF has not been approved yet and is under SEC (Securities and Exchange Commission) review. The decision has been postponed until October 12, 2025. This delay is a part of broader caution from the agency regarding cryptocurrency and NFT-related ETFs as they assess and evaluate the regulatory, custody, and valuation challenges.
This challenge (pudgy Penguin NFT liquidation) can negatively impact the ETF’s approval. Forced liquidation highlights market volatility and risks around NFT valuation. This will make the SEC more cautious as such scenarios raise concerns about stability, investor protection and liquidity in the ETF structure which might slow down the regulatory clearance. However, on the other hand, a well-managed intervention or stabilization in the NFTs and token market could improve the entire scenario.
