The Impact of Bid Incentives on NFT Market Distortion

03/08/2023 12:48 • AI & Tech Insights • 495 views

According to reports, the analysis shows that Blur’s bid incentives distort the market, resulting in the NFT offer being higher than the “immediate purchase” price, that is, the price offered by the buyer in the NFT market is higher than the asking price of the collection. If you want to buy Doodles NFT in Blur, the maximum bid for more than ten items in this series is 5.07 ETH (about $7900), and the “Buy Now” price is 5.03 ETH, as is the case for other series, including Bored Ape Yacht Club, Azuki and Moonbird NFT. Moonbird’s offer on Blur is higher than the asking price. When bidding on the listed items, the seller must accept the price before the transaction is completed, The buyer will trigger the transaction of “Buy Now” items. （The Block）

Blur offer incentives distort the market, resulting in NFT offer higher than “buy now” price

Analysis based on this information:

The recent surge in non-fungible token (NFT) popularity has attracted many investors to participate in the market. However, reports show that some auction platforms, like Blur, employ a bid incentive strategy that distorts market prices.

When purchasing NFT collections, there are usually two price options: bid or buy now. The buy now price is the price set by the seller, while the bid price is the offer made by the buyer. Blur’s bidding system seems to heavily favor sellers, resulting in NFT offers that are higher than the buy now price.

For example, if someone wants to purchase the Doodles NFT collection on Blur, the maximum bid for more than ten items is 5.07 ETH, which is approximately $7900. However, the buy now price for the same collection is only 5.03 ETH. This same pricing pattern is observed for other NFT series on Blur, including Bored Ape Yacht Club, Azuki, and Moonbird NFTs. In fact, the price offered for Moonbird NFTs on Blur is higher than the ask itself.

To complete a transaction on Blur, a seller must accept the bid price before the transaction is processed. If the buyer selects the buy now option, the process is immediately triggered.

This bidding strategy distorts market prices by encouraging buyers to increase their offers in the hopes of securing a highly desired NFT collection. As a result, the final transaction price of an NFT collection is much higher than the ask price, which creates an artificial demand for the collection.

In conclusion, Blur’s bid incentive strategy significantly distorts the NFT market by increasing the transaction price beyond the original asking price. This strategy may lead to market inefficiencies and is something that buyers and sellers must consider when participating in the NFT market. If too many market distortions are present, it could eventually decrease the long-term viability of NFTs as a trading asset.

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