According to research, most of the NFT trading volume in the altcoin market was scam. To date, over $30 million of NFT transactions have been manipulated.
This altcoin is the home of ‘wash trading’ operations
It’s no secret that the NFT market is widely host to market manipulations where the buyer and seller are the same in one transaction. However, a recent report compiled in Dune Analytics reveals just how bad the problem has gotten. Research shows that over $30 billion in NFT trading volume on Ethereum is Wash Trading. According to the data, shadow transactions represent more than half of the total NFT transaction volumes in 2022. That’s about 45% of all-time NFT volume.
According to analysis compiled by hildobby of Dune Analytics on Dec. 16, Wash Trading transactions accounted for more than half (58%) of total NFT volume on Ethereum in 2022. The researcher used four filters to weed out weird transactions that helped wash away trading:
- First, they filtered out obvious NFT transactions between the same wallet address.
- Second, they looked at exchanges between two different wallet addresses of the same NFT. This is also one of the most common manipulation tactics.
- Third, if a wallet address has purchased the same NFT three or more times, the transaction is marked as a wash trading as it is highly unlikely.
- Finally, if a buyer and seller in an NFT transaction originally had wallets funded by the same wallet, it is clear that there is a link between them and is therefore marked as a wash trading.
Wash trading transactions exceed $30 billion
This staggering number also represents around 1.5% of all transactions that happen on Ethereum. If this seems confusing, experts need not worry. This shows that the majority of transactions are legal. But it turns out that it usually happens at a lower price than wash trading.
Hildobby said, “It’s almost half the incredible ‘total trading volume’ we hear so often. These are people playing games in the system and not legitimate business,” he wrote. According to the data, NFT marketplaces LookRare and X2Y2, both offering token rewards for participation in the platform, had the highest percentages of wash trading with 98% and 87% of their total volumes, respectively. Hildobby attributes the increase in wash trading activity to increasing competition among NFT platforms looking to grow their market share.
“Well-intentioned plans to encourage usage quickly emerged as a way to drive this volume and stay ahead of the race to be the most successful platform,” the researcher said. As such, many widely quoted statistics have been misleading at best. It paints a picture of organic use that doesn’t quite match reality.” he wrote
Wash trading is illegal under US law. It is still difficult to follow in the crypto space. In February, blockchain research firm Chainalysis reported that although most NFT wash trading transactions were previously unprofitable due to high gas fees, a group of 110 transactions was still able to make $8.4 million in profits. cryptocoin.com We have conveyed the report prepared by Solidus Labs on scam altcoin projects.
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