NFT Market Cools as Trading on Ethereum and Solana Dips

By Andrew Hayward

Following a record-shattering month of NFT trading volume for leading marketplace OpenSea in January, trading volume across the wider NFT market cooled in February, based on data shared from multiple sources.

OpenSea recorded nearly $3.65 billion worth of trading volume in February between NFT sales on Ethereum and Polygon, the latter a sidechain scaling solution for Ethereum that cuts down on transaction fees. That data comes from Dune Analytics, which shows an approximate 27% month-over-month dip in trading volume on the platform.

Although the marketplace recorded three separate days with more than $200 million worth of Ethereum NFT trading volume, the daily volume chart suggests a general downward trend over the course of the month. Even so, it was OpenSea’s second-best month to date after January in terms of total NFT trading volume.

Separate data provided to Decrypt by blockchain analytics firm DappRadar shows that the wider NFT market produced $4.02 billion of what it calls “organic” NFT trading volume in February. That’s a 28% drop from DappRadar’s previous mark from January, according to a representative.

DappRadar registered a 33% drop in Ethereum trading volume across the entire NFT market, as well as a nearly 61% drop on Solana, a 38% decline on play-to-earn game Axie Infinity’s Ronin chain, and a 55% drop on Tezos.

However, not every NFT blockchain network saw declines in February. Dapper Labs’ Flow blockchain jumped nearly 83% in February thanks to the recent launch of UFC Strike, the increasing closed beta rollout of NFL All Day, and the rise of the BloctoBay marketplace.

Meanwhile, Avalanche NFT trading volume rose 20% in February, fueled in large part by the Crabada NFT game. Both Flow and Avalanche currently put up a small fraction of the amount of NFT trading volume seen on Ethereum, the leading blockchain for NFTs, but their respective shares grew in February.

And while overall NFT market trading volume fell in February, per DappRadar’s data, the firm registered an 8% rise in total NFT traders and a 2% uptick in total NFTs sold across protocols.

Pedro Herrera, DappRadar’s senior blockchain analyst, described February as a “pretty placid month for NFTs” on the surface. But with Axie Infinity topping $4 billion in lifetime NFT trading, alternative NFT protocols rising, and newer projects like Azuki and Clone X beating stalwarts like CryptoPunks and the Bored Ape Yacht Club in monthly volume, he remains optimistic.

“This, to me, says the space is slowly but surely diversifying and maturing,” he told Decrypt.

A look at LooksRare

What about LooksRare, then? LooksRare launched in January as a prominent rival to OpenSea, complete with a novel token rewards model. It not only gives users ETH rewards for trading on the marketplace, but also for staking their LOOKS rewards in the platform.

Trading on LooksRare surged almost immediately after launch, putting up towering numbers that outstripped the wider market by a significant margin. But that’s because some users were manipulating the rewards model by selling NFTs back and forth between their own controlled wallets at artificially inflated sums—as much as $50 million worth of ETH apiece. It’s effectively a form of wash trading.

In late January, analytics firm CryptoSlam estimated that LooksRare had generated more than $8.3 billion worth of NFT wash trading in just over two weeks. Compared with total trading volume data from Dune Analytics, that mark suggested that about 87% of trading volume on LooksRare by that point had been artificial market manipulation.

However, trading volume on LooksRare has fallen sharply since then, after the site’s rewards rate was cut 30 days after the site’s launch. After consistently registering $400 million or more per day in trading volume early in February, LooksRare has been below $100 million daily since February 22, per data from Dune Analytics.

DappRadar reports that LooksRare amassed more than $6.5 billion worth of total NFT trading volume in February, but does not count any of that within its figure for “organic” trading volume for the rest of the NFT market.

A DappRadar representative said that while some LooksRare NFT trading appears to be legitimate and not boosted to yield extra rewards, the firm is still working on a process to “automatically and accurately separate” wash trading data from the rest.

CryptoSlam founder and CEO Randy Wasinger told Decrypt that his team is still finalizing data analysis from February, but that it registered more than $6 billion worth of trades on LooksRare—and “more than 98%” of the sales volume comes from “known wash sales.”

As before, the suspected wash trades are heavily concentrated in NFT collections that do not include an additional royalty fee for creators, such as Meebits and Terraforms. CryptoSlam’s process for identifying NFT wash trades includes both automatic and manual identification of suspect transactions.

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