In-depth analysis of the impact of the upcoming LOOKS halving on its users
On January 10, the LooksRare NFT market debuted, launching a vampire attack on the repeatedly complained NFT giant OpenSea. Since then, those users who claimed the airdrop and pledged tokens have been “drinking red wine” while receiving LOOKS and WETH rewards with an average annualized return of 600%.
Among them, most of the WETH rewards come from users of zero-royalty collectibles (such as Meebits and Loot) in order to purchase LOOKS at a discounted price. Some people say that the token economic model is so deliberately designed to attract platform users with an exaggerated APR in the early stage.
Twitter user @hildobby_ used Dune analytics to create a chart comparing OpenSea and LooksRare (see:https://dune.xyz/hildobby/LooksRare-VS-OpenSea). We can see from this that transaction volume is not correlated with daily active users.
LooksRare has done a great job of growing its market and attracting new users over the last month, though a key driver of its growth can be attributed to its successful rewards system and lucrative rewards. Many of the incentives that drive users to trade on LooksRare are tied to this system. But this page represents that the fast-paced growth of the LOOKS market will be hampered if scammers stop trading entirely tomorrow.
LooksRare has been live for nearly 30 days, according toLooksRare Documentationsecondary title
Why Brush Traders Won’t Stop Brushing
I highly recommend everyone to read the Twitter user@ElYogui_PA's thread analyzes LOOKS' valuation.image description
Picture from Twitter user @ElYogui_PA
In the first table, we can see the profit margin of the wash trading in phase A. It shows that at a price of $4 for LOOKS, the trading volume limit for brushers to make the most profit is about $500 million. After rewards are halved (see second table), this cap is approximately $250 million.
The profit of LOOKS brushers is essentially a game between the current price of LOOKS and the total daily transaction volume. The halving of the reward means that the price of LOOKS will rise in the long term, and there is still room for arbitrage. will stop, they just need a week or so to adapt to the new gaming environment. When the price of LOOKS returns to above $8, traders who wash volume will get richer profits than before the halving, and with the reduction of daily selling pressure after the halving, it is not difficult.
What will happen before February 10?
Prices drop. This is no surprise, the price of LOOKS is dropping steadily every day at the time of writing (currently $3.60). To a certain extent, reward halving is indeed a bad thing in the ears of investors who do not look further. And unfortunately, these people have the noisiest voices. Now, we're actually seeing two different scenarios. Some people are not firm in their holdings, because they are worried that people who wash the volume will stop trading because the reward is halved. At the same time, some people hope to predict the early sell-off and buy it back at a lower price after the reward is halved. Once these two parties have sold their tokens, they will make a very strong negative noise and try to convert more stakers into sellers. We must beware of the emergence of FUD.
What will happen on February 10th?
It's hard to say exactly what will happen on day one, but the initial APR will obviously drop a lot. Since staking rewards and transaction rewards are halved, this means we can expect LOOKS APR to halve and WETH APR to halve as traders adjust to the new volume cap. We'll probably see the APR drop to around 150-200%, but that's still an amazing return. What is certain is that the APR will remain above 100%, with the LOOKS rewards themselves accounting for almost 100% post-halving (depending on total stake).
At this point, we should see riskier investors coming back in after the LOOKS price bottomed out, and a slow reversal will begin. There are also plenty of first-time buyers who have been waiting on the sidelines for a February 10th bottom, which could cause LOOKS to bottom out the day before. This is an obvious buying point for most.
What will happen after February 10?
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This halving does not herald the end of the WETH farm. However, the next 90 days are critical for LooksRare. This gives them enough time to grow the market to organic growth traffic and get a big slice of the NFT market.
