Faced with scourge of hacks, NFT trading volume falls to 12-month low

There was a huge increase in interest in NFT through the summer of 2021. After a year, the NFT market’s trading volume has plummeted.

Due to the lowest trading volumes in a year and the growing epidemic of NFT hacks, interest in NFTs has waned along with the general cryptocurrency market.

NFT suffers setbacks

The non-fungible token market is finding it difficult to sustain the exponential growth it saw during the bull market of 2021. Trading volumes have fallen sharply recently and are already at their lowest levels since July 2021, according to data from prominent NFT trading sites such as OpenSea.

PierreYves Gendron’s Dune data indicates that OpenSea’s trading volume peaked in January at $5.8 billion. But through the first two quarters of the year, trading on the platform declined rapidly, falling to $3.1 billion in May.

Compared to other months, June’s trading volume saw the largest decline in the exchange’s history, falling 74% to $826 million. With four full days left in the month, OpenSea has already earned $456.9 million, continuing its downward trend.

OpenSea monthly USD volume (Source: @PierreYves_Gendron via Dune)

The daily trading volume for OpenSea shows a more marked drop in activity. Daily volumes in June and July were close to $20 million after May 1 saw $543 million in deals, the day after Yuga Labs’ long-awaited Otherside drop went online.

The volume of characteristic NFT transactions on OpenSea furthers the waning interest. Transactions consistently exceeded 150,000 per day in May and the first few days of June. They haven’t been able to surpass 75,000 since more than a month ago.

Although other newer exchanges have provided stiff competition for OpenSea, it is clear that overall trading volumes are still declining. The top two exchanges after OpenSea, X2Y2 and LooksRare, have failed to make up the difference with their recent trading volumes.

X2Y2 currently manages about $27 million in daily trading volume, while LooksRare sees around $9 million, according to Dune statistics provided by cryptuschrist. Furthermore, because both exchanges provide traders with token incentives, it has been assumed that a significant portion of their combined volume comes from wash transactions by market manipulators hoping to profit from the tokens (the exchanges reward the most active users).

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Hacking on projects has also steadily increased

In 2022, cyber attacks against NFT collections have steadily increased, according to a new TRM Labs study, costing the NFT community over $22 million in May alone. NFTs are tokens built on the blockchain that represent ownership of physical or digital assets.

According to the report by TRM Labs, a company specializing in digital asset compliance and risk management, hacks related to NFT scams used to compromise Discord accounts increased by 55% in June 2022 compared to the previous month.

TRM Labs investigator Monika Laird said:

“Since 2022, we’ve seen these compromises happen on a large scale, especially on Discord.”

The NFT community has suffered more than 150 compromises targeting NFT projects’ Discord servers since May 2022. A selection… (1/2) pic.twitter.com/cEdPaV5mQI

— TRM Labs (@trmlabs) 25 July 2022

Through its Chainabuse reporting platform, TRM Labs claims to have received over 100 allegations of Discord channel hacking in the past two months. According to Laird, the attacks take place every week and often target ERC-721 tokens, which are a non-fungible token standard on the Ethereum network.

BTC/USD trades at $22k. Source: TradingView

Laird noted that the relationship between wallets and common consolidation sites (exchanges, mixers) on the chain side shows that the same individuals are likely behind the majority of these attacks.

The creator of Bored Apes Yacht Club, Yuga Labsposted the following last week on Twitter:

“The NFT community is the target of a persistent threat group that our security team has been monitoring. We predict that they will soon use compromised social media accounts to launch a coordinated attack against a number of communities. Be careful and stay safe.”

According to TRM Labs, chain evidence indicates that the hacker who targeted the Bored Ape Yacht Club in June may be responsible for several of the Discord hacks. Other projects the company has its eye on include Anata, Lacoste, Tasties, Parallel, Bubbleworld and more.

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   Featured image from Getty Images, chart from Tradingview.com, Dune Analytics