LooksRare trading volume surpasses 500 million, overtaking OpenSea! Whales are frantically swapping hands, is trading mining really profitable?

The NFT trading platform LooksRare recently launched a vampire attack on OpenSea through the airdrop of LOOKS tokens. In addition, the platform's profit-sharing and transaction mining mechanism have attracted many speculative users to engage in large transactions. The trading volume on the 12th even reached a staggering $500 million. However, is transaction mining really profitable?

LooksRare Emerges

LooksRare is an NFT trading platform built on Ethereum, aiming to replace OpenSea as a more user-friendly platform.

"We are tired of their arrogant attitude towards creators, decision-makers who value commercial value over community, those who seek IPOs rather than thinking about how to benefit the community," said the LooksRare team.

The first step LooksRare took was to distribute airdrops to eligible users. The conditions for receiving the airdrop are as follows:

1. Achieve a trading volume of 3 ETH or more on Opensea between June 16 and December 16, 2021.
2. List NFTs for sale on the LooksRare platform.

In addition to the free airdropped tokens, the platform grants various functions to the LOOKS token:

1. Stake LOOKS tokens to receive rewards in LOOKS.
2. Provide LOOKS-ETH Uni V2 LP tokens to receive liquidity rewards in LOOKS.
3. Distribute 100% of the platform's fees to LOOKS stakers in WETH.

4. Purchasing qualified NFTs on the platform can earn LOOKS rewards. The trading volume of this NFT series exceeds 1,000 ETH.

LooksRare Surpasses OpenSea in Trading Volume

Although LooksRare offers many features that OpenSea does not, it is still a newly established platform that needs time to build its user base. Surprisingly, its trading volume surpassed OpenSea's yesterday, possibly due to the platform's trading mining rewards.

According to data from Dune Analytics, on the 11th and 12th of this month, LooksRare's trading volume far exceeded that of OpenSea.

• OpenSea: $87.66 million vs. LooksRare: $322 million on 1/11
• OpenSea: $84.65 million vs. LooksRare: $500 million on 1/12

However, LooksRare's daily active users and number of transactions are much lower than those of OpenSea.

• OpenSea: 60,438 users vs. LooksRare: 3,540 users on 1/11
• OpenSea: 61,119 users vs. LooksRare: 3,084 users on 1/12

• OpenSea: 113,106 transactions vs. LooksRare: 3,964 transactions on 1/11
• OpenSea: 93,399 transactions vs. LooksRare: 2,990 transactions on 1/12

From the above data, a strange phenomenon can be observed: how can LooksRare generate such a remarkable trading volume with so few transactions? It raises questions about whether users are engaged in wash trading behaviors.

By further observing the trading trends on CryptoSlam, it can be seen that the trading volumes of NFT projects Meebits and Loot have seen a significant surge in the past few days, with growth rates of tens of thousands percent, which is highly unusual.

A closer look at the trading activities reveals many instances of the same NFTs being traded back and forth between two addresses, both on the LooksRare platform. These users appear to be attempting to earn the platform's trading mining rewards by generating a large trading volume through wash trading.

Can Profits Be Made from Generating High Trading Volume?

The following calculations are based on whitepaper data and trading statistics. Since Meebit and Loot do not incur royalties and have a trading cost of only 2%, assuming an individual's daily trading volume is $5 million:

• Platform trading volume: $500 million on 1/12
• Daily trading mining rewards for the past 30 days: 2,866,500 LOOKS
• LOOKS token price: $4, assuming it can be maintained above this price
• Individual's daily trading volume: $10 million
• Individual's daily trading cost: $200,000
• Trading volume share: 2% (10 million / 500 million)
• Number of LOOKS token rewards allocated to the individual: 57,330 LOOKS (2,866,500 LOOKS * 0.02)
• Amount of LOOKS token rewards for the individual: $229,000 (57,330 LOOKS * $4)

Through the calculations above, it can be observed that as the platform's trading volume rapidly increases, a higher trading volume share of 2% is required to profit through trading mining. If the platform's trading volume is only $50 million, a trading volume share of 0.2% is sufficient.

However, as more users discover the profitability of trading mining and the decrease in mining rewards after 30 days, this profit-making method will gradually become ineffective. Additionally, generating such a high trading volume also requires a significant amount of time.

Of course, there are also other beneficiaries:

Remarkable Funding Rates

The funding rate for LOOKS perpetual contracts on the FTX exchange is currently remarkably negative, maintaining above -0.1% for an extended period, even reaching -0.1358% at one point. This is approximately 100 times higher than the funding rate for Bitcoin perpetual contracts during the same period, indicating that a significant number of people are shorting LOOKS.

Some may speculate that there could be a considerable number of people buying LOOKS tokens to stake on the platform to earn token rewards, as staking rewards are nearly 100%. They may hedge by shorting LOOKS perpetual contracts.

However, it is also possible that these users engaged in generating trading volume are shorting LOOKS to mitigate the risk of LOOKS token price collapse, ensuring that their trading mining rewards are not at a loss. Regardless of the reasons behind these actions, when the trading mining rewards period ends and the staking interest rates decrease as rewards diminish, the token may experience a wave of decline. Please evaluate carefully before making any transactions.

Note: This article does not constitute financial advice. All operations should be carried out with caution. Engaging in one-sided opening positions to earn high funding rewards is extremely risky.