Wash Trading Or Not – LooksRare’s Recent Move Is a Part of a Bigger Plan

LooksRare’s trading volume has rocketed close to $1 billion since the NFT marketplace went live, with some collectors attributing the surge in volume to wash trading.
Image source: looksrare.org

Quick take:

  • LooksRare’s highly awaited launch took place on Monday with a token airdrop $LOOKS.
  • The platform claims to be by “NFT people for NFT people”. 
  • LooksRare trading volume has risen to nearly $1 billion to date, with some calling it wash-trading.

LooksRare’s launch has taken the world of NFTs by storm after trading volume rocketed closer to $1 billion within days. Although OpenSea trading volume is on course for a record month, the last few days it has been dwarfed by LooksRare’s thunderous debut.

The new non-fungible token marketplace is created by two anonymous developers, Zodd and Guts, and claims to be made by “NFT people for NFT people”. The marketplace went live on Monday, also launching its $LOOKS token.

The spike in trading volume has been attributed to wash-trading within the community. LooksRare has incentivised creators and collectors to join its platform with the $LOOKS token airdrop, which they will also earn as a reward for their trading activity.

Although some collections automatically qualify for the rewards program, LooksRare has set a minimum trading volume of 1,000 ETH for other collections to start generating rewards for traders.

As a result, the NFT community has taken this as a potential loophole enticing wash trading. However, LoopsRare states in its marketplace launch blog that if anyone tried to wash trade their trading volume in an attempt to earn more rewards, the strategy would result in a failure because the marketplace has placed a limit on the number of rewards per day. 

But social media chatter still thinks that some people may still be trying to bump up the trading volume after one user spent 14,700 ETH ~$50 million on Meebit #13824 from the Meebits NFT collection.

Loopifyyy a popular Twitter user and investor in NFTs quoted the transaction saying, “I do hope they tackle wash trading rather than embrace it. This user can be blacklisted and lose out all that ETH from the 2% fee, and I don’t think he will ever try it again.”

Clearly, not everyone thinks that LooksRare’s incentivised trading is a bad thing, despite creating an environment that could inspire wash trading.

But Loopifyyy was quick to point out the danger, tweeting “Surprised people think it’s good for the marketplace as a whole because it’s beneficial to stakers…What about the users who actually trade on the marketplace?”

However, while the FUD about wash trading is a concern, LooksRare’s recent surge in trading volume could be bigger than just a few accounts buying Meebits at extraordinary prices.

LooksRare’s debut echoes memories about SushiSwap, the acclaimed DeFi Chef with a Sushi, back in 2020. SushiSwap used a market concept called “Vampire Attack”, which basically entices liquidity providers from one exchange platform to the new platform, in turn boosting liquidity and trading volume in the recently launched marketplace. 

SushiSwap’s trading volume surged to $150 million within days of launching, before rocketing to over $1 billion.

Mirroring SushiSwap’s strategy to LooksRare, it could easily be that LOOKS has enticed collectors and creators from leading NFT marketplace OpenSea to join its “by NFT people for NFT people ” platform.

On its blog, LooksRare accused some marketplaces of not taking their communities seriously and instead focusing on business.

“We’re tired of the de-platforming of creators, and the decision-makers who value business over the community, seeking IPO instead of benefiting the communities that got them there,” LooksRare wrote on its blog.

In this case, LooksRare’s $LOOKS token airdrop and lower transaction fees of about 2% could be deemed as the publicly disclosed incentives for joining their marketplace. 

Therefore, although the NFT community seems to be more concerned about wash trading on the platform, it looks like LooksRare has bigger plans ahead.

Some community traders have been particularly excited by its communication, a feature they think OpenSea lacks in great depth.

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