NFT markets have displayed an intriguing set of metrics in 2023 as wash trading and token farming practices emerge amidst declining overall trading volumes.
According to a recent DappRadar report, Bored Ape Yacht Club (BAYC) saw a staggering 1,095% growth in 7-day trading volume, reaching $21.9 million.
With analysis from CryptoSlate data and Footprint Analytics, this article examines the market dynamics driving these phenomena and offers a comprehensive understanding of where the NFT market might be heading.
Wash trading and Blur Point farming
A closer analysis of BAYC’s recent surge in trading volume reveals that wash trading significantly contributed to the increased metrics.
DappRadar’s report states that wash trading occurs when traders create artificial volume by trading assets among themselves. This practice has become more common as the Blur marketplace token drop Season 2 approaches. As a result, NFT market makers are strategically leveraging the Points collecting mechanism to maximize future profits.
In the case of BAYC, only around 30 unique Bored Apes were involved in these wash trades. However, a significant portion of these sales was attributed to whale wallets, suggesting potential trading activity among their accounts, although further verification is required.
In addition, as Blur’s NFT peer-to-peer lending protocol emerges, Bored Apes’ eligibility as collateral adds to their appeal, touching on the intersection of points farming and collateralization, the DappRadar report noted.
A market for professionals
The NFT market is experiencing a contraction in 2023, with daily trading volumes falling significantly compared to previous highs. Trading volumes declined across the board while Blur took the lion’s market share from OpenSea. This report suggests that NFT royalties are becoming less relevant, leading creators to seek new income strategies.
Blue-chip NFT projects have displayed resilience during the bear market but are experiencing declining floor prices. Ethereum’s dominance in the NFT market is also challenged by network congestion and fees, which may drive users to alternatives such as Polygon.
Navigating the volatile NFT market
Footprint Analytics’ April Monthly NFT Report noted that the NFT market witnessed a 50% drop in trading volume and an oversupply of sellers by the end of the month.
Despite some growth in the number of NFT projects, the decrease in funding indicates investors’ caution about putting money into their sector.
As wash trading and token farming practices emerge amidst declining trading volumes, the NFT market landscape becomes increasingly complex. This evolving market necessitates that investors and traders stay well-informed about the latest developments and trends to navigate it effectively.