Deciphering the Metaverse: The display of modern tribalism

After an astronomical rise in trading activity since the beginning of 2021, the NFT market seems to be cooling off and is entering a minor economic slowdown, which counteracts the seemingly overheated market sentiment that had previously dominated the prevalent narrative. Since its recent peak at $332M on February 1st, daily NFT trading volume on Ethereum declined by -52%, reinforcing the notion of a short-term retracement. Historically, consistent fluctuations in trading activity have been an integral part of the NFT market as trading volume has also tended to gyrate amidst larger upward movements. Likewise, these falling trading volume levels could signify the natural ebb and flow of the market but could also indicate a reversal of the overarching, long-term trend.

In this context, LooksRare continues to be the subject of much debate as market participants attempt to improve the signal-to-noise ratio of the actual trading volume, as persistent wash trading still seems to skew the underlying data. In a previous issue, we tried to separate the wheat from the chaff by excluding NFT collections with 0% royalties entirely since they constitute the vast majority of NFTs falling prey to targeted wash trading. However, the potential drawback of this approach is that real volume for these NFT collections, by default, gets omitted altogether and it also turns a blind eye to potential wash trading taking place through NFTs with non-zero creator fees.