Will the Blur airdrop become the "bear market ender" for NFT aggregation trading?

Written by: 0xLaughing, Rhythm BlockBeats

Introduction

Since the official launch of the NFT market Blur on October 20 last year, it has gained favor among users due to the platform's smooth experience and low trading friction. The three rounds of airdrop activities incentivizing users to place orders and bid have attracted users to experience and stay. During this period, OpenSea launched a "mandatory royalty tool" to force NFT project parties and trading platforms to take sides, while Blur has circumvented this "Maginot Line" through functional iterations, gradually establishing a foothold in the fierce competition of NFT trading platforms.

The native token of the NFT market Blur, $BLUR, will officially launch on February 14, and this nearly four-month-long airdrop activity has garnered much attention. Discussions about $BLUR in the market are incessant: some believe that the good news will lead to bad outcomes, predicting a downturn in the NFT market; others think that the wealth effect it brings will radiate across various fields of the NFT market, sparking speculation and pushing the NFT market into a new phase.

Since the launch of Yuga Labs' game at the end of December last year, the NFT market has been warming up in a "mini bull market" cycle. Will the landing of the Blur airdrop mark the "watershed" between bull and bear markets? Let's explore.

Bull and Bear Factions, Heated Debate

Bearish faction: The end of the "Bid to Airdrop" event will drastically reduce market liquidity, potentially triggering a chain reaction of declines.

Market share of NFT exchanges

From Dune Analytics data, it can be seen that before the launch of Blur's third round of the "Bid to Airdrop" airdrop activity, the competition between Blur and OpenSea was quite balanced. However, since the launch of the third round of airdrop activities, the scales of victory have gradually tilted in favor of Blur: at one point, Blur's trading volume accounted for 74% of the entire NFT market. Although there has been some subsequent decline, it can still compete evenly with OpenSea.

The winning strategy lies in the fact that this "Bid to Airdrop" activity helps provide higher liquidity for NFT trading on the Blur platform.

In the third round of the airdrop, Blur will reward users participating in bidding with corresponding points based on the 24-hour trading volume of a specific NFT series. The bids closest to the floor price (the most likely to be accepted) will be awarded the majority of points, with the points earned being proportional to the bidding time.

At the same time, users can deposit the ETH they use for bidding into the Blur platform and bid repeatedly across NFT series, allowing points to accumulate multiple times.

As is well known, due to the indivisible nature of NFTs and their high unit prices (blue-chip NFTs often start at 10 ETH), low quantities (total supply below 10k is most common), differences in rarity (holders may subjectively believe their NFTs are more unique), and high trading slippage (platform fees + royalties), the floor price and offer prices often do not match, leading to insufficient trading depth. This is the main reason for the low matching efficiency in NFT market transactions.

This creates a bad situation:

• Traders wishing to quickly sell NFTs at a fair value often have to endure significant slippage losses.
• Capital inefficiency.

However, the methods employed in Blur's third round of airdrop are effective (without discussing the merits of its royalty strategy here):

• Users can utilize their funds more efficiently for trading/airdrop harvesting.
• This bidding rule will promote self-competition between buyers and sellers in the market. Participants in bidding/buyers will try to bring offer prices closer to the floor price/fair value of the NFT series to obtain the airdrop, allowing sellers to sell at better prices and achieve better exit liquidity, thus improving the matching efficiency of transactions between buyers and sellers. The trading depth, liquidity, and matching efficiency on the Blur platform have all improved.

However, causality follows; when the Blur airdrop activity ends, the lack of profit may lead to a large number of bidding orders being canceled, and the advantages in trading depth, liquidity, and matching efficiency may be sharply weakened in a short time, thus losing the buffer against significant fluctuations in the NFT market.

The locked amount in Blur's Bid pool is already declining.

In fact, funds in Blur's Bid pool have already begun to withdraw: according to DeFiLlama data, on February 9, the locked amount on the Blur platform was 29.27k ETH, which has now dropped to 23.98k ETH, a decline of 18.1% over four days.

It is foreseeable that if Blur officials further incentivize users to bid, funds in these Bid pools will continue to flow out. If the situation worsens and the NFT market experiences a downturn, it could trigger a chain reaction:

• Previously, users deposited ETH into the Blur platform to participate in bidding for airdrops, possibly using the same funds to bid repeatedly across multiple NFT series. When one of the NFT series they bid on crashes, the completion of the bidding orders will cause these funds to disappear from the bids on other NFT series, which also means the disappearance of trading depth and liquidity.
• Some NFT lending platforms currently maintain high collateral ratios, which could lead to easier liquidations during a downturn in the NFT market. When combined with the sharp reduction in liquidity in the Blur market, bank runs and bad debts may become more likely.

Bullish faction: The wealth effect of the $BLUR airdrop will spill over into various sectors of the NFT market, benefiting the entire market.

The logic of the bullish faction is relatively simple. As the only NFT trading platform currently capable of threatening OpenSea's leading position, Blur naturally has a high valuation, and the market has high expectations for it.

For users who have continuously participated in the Blur airdrop activities, some may choose to cash out after receiving their $BLUR airdrop; for investors who did not participate in the airdrop, wanting to invest in the future of this leading trading market will naturally lead them to buy $BLUR, many of whom may be non-NFT market investors. The market has high expectations for $BLUR, and as trading occurs, the wealth effect follows.

For this "wealth creation out of thin air," funds and enthusiasm will spill over into various sectors of the NFT market. Investors will use this portion of profits to purchase NFT assets or tokens related to NFTFi, thus benefiting the entire market.

In fact, in the last month or two, the prices of NFT-related tokens such as x2y2, LooksRare, BendDAO, and JPEG'd have already seen significant increases.

Outlook

As Blur has not yet disclosed the tokenomics model for $BLUR, we cannot ascertain the initial circulation situation and the details of value capture for the protocol. Additionally, due to the inability to determine the proportion of users who are merely attracted by low fees versus those who are brushing trading volume for airdrops, it is impossible to accurately value the Blur platform and its token $BLUR based solely on market share.

People are looking forward to the $BLUR airdrop becoming the new engine for the NFT bull market, observing whether Blur can replace OpenSea as the voice of the NFT market, and seeking opportunities for the "watershed" between bull and bear markets.

At the same time, the SEC has been frequently active in the crypto space recently, and the day of the $BLUR airdrop launch coincides with the release of the CPI. As this data is crucial for the future trends of the US stock and crypto markets, the market may experience significant volatility. But do not be afraid; after all, "the bigger the storm, the more valuable the fish."