BendDAO’s NFT mortgage lending protocol allows users to borrow ETH using NFTs as collateral, but its liquidation mechanism may amplify market volatility. When an NFT’s floor price drops below the health factor threshold, a 48-hour liquidation protection period triggers, followed by an auction if unpaid. High starting bids (95% of floor price) and illiquid NFT markets often deter bidders, leading to failed auctions and further price drops. This can spark a liquidation cascade, as seen in 2022 with Bored Ape NFTs, pushing floor prices lower and destabilizing the market. Proposed changes, like lowering the liquidation threshold to 70% and shortening auctions to four hours, aim to mitigate risks but may not fully address volatility in bear markets.