A new platform in the NFT segment has hit the market. Its volumes even surpass the results of OpenSea briefly. However, there are improper trader practices behind it.
A strong start for LooksRare
When LooksRare took its first steps into the NFT segment not so long ago, no one expected the staggering statistics that the platform would achieve. It turns out that in its first few days of operation, LooksRare has surpassed the trading volume of the current leader in the NFT segment, which is OpenSea.
According to analysts at DappRadar, both exchanges have experienced a significant discrepancy between volumes and the number of users involved in trading. This is because it appeared that while OpenSea was dethroned by its younger competitor, it also had a higher number of active traders. This could have meant that traders on LooksRare began trading among themselves so as to create artificial traffic. For example, on January 19, LooksRare averaged nearly $380,000 in trading volume per user on 1 single day.
Washtrading the cause
The reason for such a phenomenon, however, is not the interest of traders in the new and at the same time expensive NFT collection, but more the opportunity to acquire free Looks tokens. These are issued in response to the trading volumes of users investing in NFT on LooksRare. DappRadar has noticed the presence of many investors holding two portfolios each and trading exclusively with each other in order to acquire the highest possible airdrop. This practice is called washtrading and is prohibited in traditional markets. LooksRare representatives, on the other hand, suggested in official communications that they had anticipated this kind of activity by traders, hence they adjusted their trading fees enough to make the activity unprofitable. As it turns out, this was not done precisely enough, and as a result, merchants are still reaping significant profits through improper practices.
Does LooksRare threaten OpenSea?
The profits you can currently make on LooksRare through washtrading will begin to expire on February 10, when the platform enters its second phase of rewarding the highest volume owners. At that time, profits will drop significantly, which may become less profitable for traders. It is therefore expected that there will be an outflow of users and therefore a decrease in turnover. It is certain, however, that a lot of people have heard about LooksRare thanks to this kind of treatment. It is also possible that in the near future they will create their own account on this platform.