Based on data given from several sources, trading volume throughout the larger NFT sector fell in February after a record-breaking month of NFT trading volume for top marketplace OpenSea in January.
In February, OpenSea recorded approximately $3.65 billion in trading activity between NFT sales on Ethereum and Polygon, an Ethereum sidechain scaling solution that reduces transaction fees. This information comes from Dune Analytics, which reveals a decrease in trading volume on the platform of about 27% month over month.
The daily volume chart shows a general declining trend over the course of the month, despite three days with more than $200 million in Ethereum NFT trading activity. Nonetheless, in terms of total NFT trading volume, it was OpenSea’s second-best month to date after January.
DappRadar, a blockchain analytics startup, released separate statistics to Decrypt showing that the larger NFT industry created $4.02 billion in “organic” NFT trading volume in February. According to a spokesman, this is a 28 percent decrease from DappRadar’s prior January mark.
DappRadar saw a 33% loss in Ethereum trade volume across the whole NFT market, as well as a nearly 61 percent drop in Solana, a 38 percent drop in Axie Infinity’s Ronin chain, and a 55 percent drop in Tezos.
In February, however, not every NFT blockchain network suffered reductions. Due to the recent debut of UFC Strike, the increasing closed beta rollout of NFL All Day, and the rise of the BloctoBay marketplace, Dapper Labs’ Flow blockchain jumped approximately 83 percent in February.
Meanwhile, the Crabada NFT game boosted Avalanche NFT trading volume by 20% in February. Although Flow and Avalanche only account for a small portion of the total volume of NFT trading on Ethereum, the most popular blockchain for NFTs, their respective shares grew in February.
While overall NFT market trading volume declined in February, according to DappRadar’s statistics, total NFT traders increased by 8%, and total NFTs sold across protocols increased by 2%.
On the surface, February was a “very tranquil month for NFTs,” according to Pedro Herrera, DappRadar’s senior blockchain researcher. However, he remains optimistic, citing Axie Infinity’s $4 billion in lifetime NFT trading, the rise of alternative NFT protocols, and upstart projects like Azuki and Clone eclipsing stalwarts like CryptoPunks and the Bored Ape Yacht Club in monthly volume.
“To me, this indicates that the space is gradually but steadily diversifying and maturing,” he said.
LooksRare emerged in January as a strong competitor to OpenSea, with a unique token incentives concept. Users can earn ETH not only by trading on the marketplace but also by staking their LOOKS earnings in the platform.
Trading on LooksRare exploded almost soon after its introduction, throwing up massive amounts that far outstripped the wider market. However, this is due to certain individuals abusing the rewards model by selling NFTs between their own controlled wallets for artificially inflated amounts of as much as $50 million worth of ETH each. It’s essentially the same as wash trading.
LooksRare was believed to have generated more than $8.3 billion in NFT wash trading in just over two weeks by analytics firm CryptoSlam in late January. When compared to total trading volume data from Dune Analytics, that figure indicated that artificial market manipulation accounted for around 87 percent of trading volume on LooksRare at the time.
However, since the site’s incentives rate was decreased 30 days after its introduction, trading volume on LooksRare has dropped dramatically. LooksRare has fallen below $100 million daily since February 22, according to data from Dune Analytics, after frequently posting $400 million or more in trade volume early in February.
LooksRare amassed more than $6.5 billion in total NFT trading volume in February, according to DappRadar, but none of that is included in its calculation for “organic” trading volume for the remainder of the NFT industry.
While some LooksRare NFT trading looks to be legitimate and not enhanced to earn extra rewards, a DappRadar spokesman said the company is still working on a process to “automatically and accurately separate” wash trade data from the rest.
Randy Wasinger, the founder and CEO of CryptoSlam, told Decrypt that his team is still working on data analysis from February, but that his company has logged more than $6 billion in trades on LooksRare, with “more than 98 percent” of the sales volume coming from “known wash sales.”
The suspected wash trades are focused in NFT collections that do not involve an additional royalty fee for creators, such as Meebits and Terraforms, as they were previously. CryptoSlam’s method for detecting NFT wash trades comprises both automatic and manual detection of suspicious transactions.