NFT market crashes. Many question, Is Blur to blame?
nftjedi
From the start, the marketplace Blur has sparked controversy.
In 2022, it wrested control over the NFT market share from OpenSea by abandoning creator royalties, to lure traders away from OpenSea. It worked. Now, near 0% creator royalties are standard on both Blur and OpenSea for NFTs created before 2023, which include most of the blue-chip and midcap collections. (See our prior post on the exact % of royalties, and respective policies.)
As we predicted, this race to the NFT bottom came at the expense of creators, who were left with no royalties. This week, Nansen reports that creator royalties for NFTs have hit their lowest level in 2 years. No surprise.
Despite efforts to enforce creator royalties on-chain and across marketplaces, NFT royalty payments dropped to a two-year low in June, according to a recent report from @nansen_ai. @camgthompson reportshttps://t.co/YSVLGhZdRZ
For whatever reason, Blur largely escaped scrutiny. That is, until this week. In past 48 hours, we’ve seen a flurry of news media and NFT influencers openly scrutinizing and criticizing Blur.
So what changed?
Last week, the NFT market crashed with a broad sell-off of major pfp collections. The initial sell-off was caused by Azuki’s disappointing reveal of a second-generation Elementals collection, which caused the OG Azuki collection to fall over 50% from 17.5 ETH to below 6 ETH at one point.
As the entire NFT market for pfp collections saw a blood bath, the news media started to investigate the possible reasons for the crash.
Many experts and commentators pointed to the same culprit: Blur.
The criticism: Blur’s creation of artificial incentives to trade NFTs in order to receive $Blur tokens through “farming” (placing bids on NFTs) and through Blend loans with NFTs used as collateral distorted the NFT market, and made it more susceptible to a crash because the volume of trading was artificially created by $Blur tokens, and not dependent on the underlying artworks for the NFTs.
In other word, Blur “farming” and loans made NFT trading no longer about NFTs. Instead, it was about accumulating $Blur tokens.
List of negative media coverage of Blur in past week
Blur really turned 95% of NFT collections into floors, crushed mid-rare values and then said “hey here’s trait bidding!!” 😂 Is there even a point anymore
Artists used to buy a lot of nfts, they dont as much anymore, because Opensea and Blur killed royalties, so now every eth they have they must keep it. (for most)
Reading @beaniemaxi a investor in Blur and @punk9059 a blur farmer takes makes me think that prior to Blur, there was a culture that respected the creators and collectors. The gamification of culture for greed clearly hasn’t ended well and so many creators have left.
🌶️ take: Blur never promised a date for the airdrop. Points are a nice to have when you bid for NFTs you want, not meant to incentivize farming & fake volume.
People are just upset because they ran unprofitable MM strategies hoping the airdrop would bail them out and it won’t.
Punk prices went from 9 months of pure stability to one of the worst 3 month stretches they've ever had when incentivized bidding was introduced. pic.twitter.com/Bk2oo5j7Iv
Have seen plenty of ex-professional traders who are here now share how Blur incentives are totally unlike anything in traditional markets and the impact it has had.
Also professional traders who are leading the farming charge would have 0 incentive to FUD about because they’re…
A new incentive was created that didn't exist previously, which is to constantly bid/list/buy/sell to earn a token, instead of to earn eth from flipping.
NFT Stats’ (Sam’s) view on the effect of Blur farming, liquidation of Blend loans
Sam aka NFT Stats explains how the incentives on Blur, especially farming of points, distort the NFT market: “The basic idea uh was that really over the weekend we went from you know we’ve gone from 4 000 at Peak to to 2700 nfts that were on blend so a lot of liquidations. There now what do liquidations mean it means that the NFTs go into the hand of airdrop Farmers. Airdrop farmers are the main lenders and they’re the and tend not to be kind of diamond-handed holders. Once they get those NFTs so that’s just more than needs to get dumped.”
Will an SEC investigation of $BLUR be next?
Some of you may be wondering, How is Blur offering its platform $Blur tokens without SEC regulation?
Securities typically must be registered with the SEC before their offering to the public, must file a disclosure statement setting forth the risks of the security, and are subject to regulation, such as rules prohibiting insider trading and wash trading. (Check out the SEC’s summary here.)
That’s what the bankrupt FTX also attempted to do–to exclude its platform token FTT from US residents–but that didn’t stop the SEC from classifying it as unregistered security and charging FTX with a violation of US securities law.
