State of the Market

January has been an absolutely killer month for NFTs so far. Volumes in the first 2 weeks ($4.5B) have already exceeded the previous monthly high of $4.2B back in August 2021. The slightly lower average transaction value may be related to a large number of new projects (with lower prices) minting in past 2 weeks, but the number of unique buyers has already surpassed the levels we saw in December.

Most interestingly, the LooksRare decentralised marketplace launched last week and at first glance is doing 3x the transaction volume of OpenSea (OS). For the uninitiated, LooksRare airdropped $LOOKS tokens to NFT traders based on their OS trading volume in an attempt to mount a ‘vampiric attack’ on OS and siphon volume away using token rewards. The team is anon and backed by several prominent NFT investors/influencers including Pranksy, Dingaling and DeezeFi. LooksRare collects a 2% of trading fees on all transactions (vs OpenSea’s 2.5%).

However, as we covered in yesterday’s Delphi Daily, a majority of the LooksRare volume is actually from wash trading happening in five zero-royalty collections: Meebits, Terraforms, CryptoPhunks v2, Loot, and The n Project. These 5 collections show abnormally high volumes with a few NFTs trading back and forth at exceptionally high ETH values (here’s an example of one wash trader account). This is related to an ongoing volume mining program where traders earn $LOOKS rewards based on their daily volume traded relative to total marketplace volume.

“We analyzed this phenomenon using the Zero Royalty Volume, where only 2% fees are paid on each transaction toward the platform and back to $LOOKS stakers. NFT Traders accumulate volume to earn a share of the daily 2.8M $LOOKS given as trading rewards, worth $12.6M ($4.4 per $LOOKS at the time of writing). This incentivizes wash trading on the platform and accounts for 98.8% (Zero Royalty Volume) of all volume on LooksRare.”

If we were to exclude these collections, the true volume for LooksRare is mu