60% of NFT Trading Volume was Reportedly Wash Trading

According to a recent research by blockchain analytics company Dune, wash transactions accounted for about 60% of this year’s non-fungible token (NFT) trading volumes.

Wash trading involves transactions of digital assets on trading platforms, such as fungible or non-fungible tokens, with the goal of increasing transaction volumes due to the high level of competition in the market and the regular introduction of new platforms. 

The trader may open up many accounts on an NFT marketplace and utilize them to do so. This would increase the price of the asset. The ultimate objective is to deceive other traders about the good strength of demand for the asset.

Wash trades gained popularity in the crypto business in 2019, but became significant to the NFT space in 2022, according to Dune.

In typical wash trading, traders move their NFTs across two or more wallets they control, for as much Ether (ETH) as they can. By accumulating token payouts, they hope to outpace their cost of gas.

According to Chainalysis’ study from February, nearly 110 wash trading addresses made $8.9 million in profit. A few of these wallets suffered losses due to transaction costs but the gains from the profitable addresses surpassed the losses from the unprofitable ones.

Wash Trading on Different Platforms

Different NFT marketplaces range in terms of the dependency on wash trading with some platforms relying on it. According to the analysis, wash trading accounts for 98% and 87% of the volume on services like LooksRare and X2Y2, respectively. Only 25% and 22% of all of their trades, respectively, are washes.  

Additionally, Element and Sudoswap are important platforms for wash trading, with their respective volumes contributing for 66% and 11% of the activity. However, just 18.5% and 14.5% of their overall trades are washes.

In relation to the fictitious trading of an asset other than NFTs, Almost 51% of the stated Bitcoin trade volume is “bogus” and fraudulent, according to a Forbes investigation from August.