LooksRare platform rose to the top of the NFT marketplace in terms of transaction volume this year. However, it seems most of the activity on the platform is due to wash sales. Apparently, the bulk of the transactions are due to people selling NFTs to themselves to earn more coins.
Last January, two anonymous co-founders — Zodd and Guts — created the platform to challenge the NFT market leader OpenSea. The site attracted NFT enthusiasts with new features. Almost all of these ventures revolved around the LOOKS token.
The bulk of LooksRare Transactions Are Wash Sales
LooksRare offers token rewards for users who buy and sell NFTs on the site. Users then used this information to their advantage. They sold NFTs back and forth between their Ethereum wallets at artificially inflated prices. By doing so, they’ll earn more in LOOKS rewards than they’d spend on LooksRare’s 2% marketplace fee and the Ethereum network’s own gas fees.
According to NFT analytics firm CryptoSlam, these activities generated $18 billion in the platform’s trading volume. This means around 95 percent of all activity on the platform might be wash sales.
As of writing, LooksRare representatives have not commented on this information. They cannot be reached since there are only pseudonyms and titles on the “LooksRare Team” on their website.
LooksRare also allegedly masked the cooling demand in the NFT market. According to Dune Analytics data, OpenSea’s total sales have fallen every month since January. In addition, DappRadar data states the site’s sales volume went down by 67% in the last 30 days. The number of traders has decreased by 23%.
With the decrease of activity in the NFT market recently and LooksRare’s trading rewards set to drop significantly, we’ll see if it will remain profitable for wash traders to prey on the platform’s rewards model.