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NFT sales volume skyrocketed in February to heights not seen since the start of crypto winter last spring, according to data from DappRadar.
Trade passed a whopping $2.04 billion last month, up 117% from $941 million in January. These numbers make February the best month the NFT market has seen since last May, when Terra’s implosion devastated the crypto-economy and buried the then-red-hot NFT market in ice.
However, the increase seems to be owed almost entirely to a single, controversial source: Blur.
The emerging NFT marketplace, like just this month surpassed OpenSea in trading volume, has fueled its rapid rise to dominance with incentives such as rewards loyal users financially to refrain from trading on any other platform, and – crucially – to trade as many high value NFTs as possible.
Blur’s trading volume jumped over $1.13 billion in February from the previous month, an amazing statistic that accounts for almost all of the entire NFT market’s month-over-month gains. But the majority of this volume was generated of a small number of whales flip NFTs back and forth and back again, to collect BLUR tokens through the company’s incentive scheme.
Whether or not to count this trade as legitimate volume is a volatile question that now dominates 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.
“Because of the bid logic used [by Blur]bypasses most trades made by Blur farmers [our wash trading] logic,” said Pedro Herrera, DappRadar’s head of research Decrypt. “We’re looking at this now, but we don’t want to flag every Blur sale as laundry.”
Wash trading is typically defined as the phenomenon of traders selling NFTs back and forth between their own wallets, often at high prices, to artificially inflate the prestige or market value of these assets. In the past, similar efforts as game incentive programs have been offered by NFT marketplaces, such as LooksRare, has also been labeled as laundry trade.
The apparent-semantic debate over whether to label Blur’s recent surge in activity as legitimate or illegitimate has major implications for the NFT market. If the current activity at Blur was indeed discounted as laundry, February’s market-wide numbers would be more similar to January’s. Underscoring that reading is the reality that the total number of NFT sales in February remained largely unchanged from January – actually falling by just over 2% to 6.47 million.
Beyond quantitative analysis, the phenomenon triggered by Blur’s incentive structure also speaks to the growing financialization of the NFT ecosystem, which once echoed the digital art market but seems to resemble more every day the volatile and cutthroat world of DeFi.
However, despite the competition and controversy spurred by Blur’s explosive growth last month, rival OpenSea continued to follow in February, even after $13.3 billion company— probably spooked by Blur’s aggressive tactics — announced it cut the copyrights. OpenSea’s monthly trading volume increased by 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 stability is likely thanks in part to the excitement generated by Dookey Dash, a skill-based online 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, increasing the trade volume for these “blue chip” collections. On Monday, the winner of the month-long Dookey Dash contest sold his winning key for $1.63 million in ETH.
