Key takeaways:
- LooksRare is a new NFT marketplace that launched at the beginning of 2022
- The LooksRare team admitted to wash sales taking place on its platform and called the practice “genius”
- Arguably the largest NFT marketplace, OpenSea, has had a considerably lower transaction volume in January compared to LooksRare, despite OpenSea having its best month to date in January 2022
The LooksRare non-fungible token (NFT) marketplace has made quite an entrance onto the digital collectibles space – in the first few weeks since its launch, LooksRare cleared triple the amount of transactions volume of the world’s largest NFT market, OpenSea. However, the vast majority of trading volume can be attributed to the practice known as wash trading.
LooksRare surpassed OpenSea’s NFT trading volume thanks to wash trading
Wash trading is a process of repeated buying and selling to create artificial activity in the marketplace in hopes of driving up the value of assets. Blockchain analytics firm DappRadar first reported on the unusual activity taking place on LooksRare in mid-January, the first week into the NFT marketplace public operation.
Earlier in the month, LooksRare retweeted a message stating that the act of wash trading is “by design” and that “it’s genius.” Unlike OpeaSea, which charges a 2.5% fee on each transaction, LooksRare charges 2% on basic sales and zero percent fees on private NFT items. The fee structure has undoubtedly played a vital role in driving up the transaction volume as most NFT collections exchanging hands in recent wash trading have been traded without royalties.
Another important thing to consider is that LooksRare incentivizes trading on its platform with crypto rewards. Users can earn the platform’s native LOOKS tokens based on their share of the total daily volume traded on the marketplace. LOOKS can be also be staked in exchange for WETH rewards, which further increases their usability and income-generating capabilities.
According to NFT analytics firm CryptoSlam, approximately $8 billion of LooksRare’s total sales volume in January can be attributed to wash sales.
LooksRare cleared roughly $9.2 billion in trading volume between January 12 and January 28, according to data compiled by Dune Analytics. In that same time span, only 15% of the total volume could be considered as organic activity.
It is worth noting that OpenSea beat its previous trading volume, user activity, and fee-generated records in the first two weeks of January – despite this fact, OpenSea trailed far behind LooksRare in terms of transaction volume on its platform in the same time span.
It will be interesting to observe how the wash trading saga pans out. While some members of the crypto community find wash trading detrimental to the organic growth of the sector, there are many who believe that was LooksRare is doing is smart and volume spikes are beneficial to everyone.
A renewed interest in NFTs, the spike in sales, and the growing presence of institutions in the space have pushed the NFT sector to new heights in the first month of 2022 and is on pace to dramatically surpass the previously record-breaking 2021. For reference, the NFT market generated roughly $23 billion in trading volume throughout last year.
