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NFT sales volume skyrocketed in February to highs not seen since the onset of crypto winter last spring, according to data from DappRadar.
Trading surpassed a whopping $2.04 billion last month, up 117% from $941 million in January. Those figures make February the best month the NFT market has seen since last May when Terra’s implosion cratered the crypto economy and buried the then-red-hot NFT market in ice.
The surge, though, appears indebted almost entirely to a single, controversial source: Blur.
The emergent NFT marketplace, which just this month surpassed OpenSea in trading volume, has fueled its rapid rise to dominance with incentives that financially rewards loyal users for refraining from trading on any other platform, and—crucially—for trading as many high-value NFTs as possible.
Blur’s trading volume jumped over $1.13 billion in February from the month prior, a stunning statistic that accounts for almost all of the entire NFT market’s month-over-month gains. But the majority of that volume was generated by a small number of whales flipping NFTs back and forth and back again, to accumulate BLUR tokens through the company’s incentives scheme.
Whether or not to count that trading as legitimate volume is a fickle question now dominating the NFT ecosystem. Cryptoslam, a leading platform for tracking NFT sales, announced last week that it would remove $577 million worth of Blur trades from its data due to “market manipulation.”
DappRadar, another leading NFT and DeFi tracking firm, has decided to count Blur’s trading volume as legitimate, at least for now.
“Due to the bidding logic used [by Blur], most trades performed by Blur farmers are bypassing [our wash trading] logic,” Pedro Herrera, DappRadar’s Head of Research, told Decrypt. “We’re currently looking into this, but we won’t be flagging all Blur sales as wash trades.”
Wash trading is typically defined as the phenomenon of traders selling NFTs back and forth between their own wallets, often at inflated prices, to artificially inflate the prestige or market value of those assets. In the past, similar efforts to game incentives programs offered by NFT marketplaces, like LooksRare, have also been labeled as wash trading.
The seemingly-semantic debate over whether to label Blur’s recent surge in activity as legitimate or illegitimate has hefty implications for the NFT market. If the activity in question on Blur was in fact discounted as wash trading, February’s marketwide figures would look more similar to January. Underscoring that reading is the reality that the total number of NFT sales made in February remained largely unchanged from January—dipping in fact, by just over 2%, to 6.47 million.
Beyond quantitative analysis, the phenomenon sparked by Blur’s incentive structure also speaks to the increasing financialization of the NFT ecosystem, which once echoed the digital art market, but appears more every day to resemble the volatile and cutthroat world of DeFi.
Despite the competition and controversy spurred by Blur’s explosive growth last month, though, rival OpenSea continued to chug along in February, even after the $13.3 billion company—likely intimidated by Blur’s aggressive tactics—announced it would cut creator royalty protections. OpenSea’s monthly trading volume increased 18% last month, to $587.22 million. The platform also continues to boast far more unique traders than Blur: just over 316,000 traders to Blur’s 96,000.
OpenSea’s continued steadiness is likely thanks in part to the excitement generated by Dookey Dash, a skill-based web game launched by Yuga Labs, creators of the dominant NFT collection Bored Ape Yacht Club. The game required a Bored Ape or Mutant Ape NFT to access, boosting trading volume for those “blue chip” collections. On Monday, the victor of the month-long Dookey Dash competition sold his winning key for $1.63 million in ETH.