For the 4th month in a row, the 6 most popular marketplaces for Non-Fungible Tokens (NFTs) saw an increase in NFT wash trading, with a total volume of approximately $580 million.
What is wash trading?
Wash trading is a form of market manipulation in which an investor executes trades to give the impression that there is more trading activity than is actually the case. This is done by artificially creating buy and sell orders from the same person or entity to give the impression that there is supply and demand in the market.
While wash trading is illegal in traditional financial markets, there is a lack of clear regulation in both the wider cryptocurrency and NFT space.
Wash trading increased again in February
A recent report from CoinGecko reports that NFT wash trading volume in February 2023 is up 126% from the previous month, when volume hit $250 million. The report indicates that this increase correlates with the overall recovery in trading volume in the NFT marketplace, which reached $1.89 billion in February.
The 6 NFT marketplaces mentioned in the report are Magic Eden, OpenSea, Blur, X2Y2, CryptoPunks, and LooksRare. In February, X2Y2, Blur and LooksRare accounted for the majority of NFT wash trading volume, with $280 million (49.7%), $150 million (27.7%) and $80 million (15.1%), respectively.
Rather, these NFT marketplaces have actually incentivized users to increase trading volume through transaction rewards. The other 2 NFT marketplaces, Magic Eden and OpenSea, have a reported $590,000 and $42.57 million in NFT laundry trades. CryptoPunks, on the other hand, saw no NFT wash trading, according to the report.
In conclusion, the CoinGecko report shows that NFT wash trading accounts for 23.4% of “unadjusted trading volume” on the 6 largest NFT marketplaces. It is not yet known whether this trend will continue, and if so, how long it will last.