2022 became one of the pivotal years for NFTs growth in industries across the globe, especially concerning the rising number of NFT collections and the increasing adoption of the technology across various industries. According to bitsCrunch’s data, 613K new NFT contracts were made, representing an 860% increase from the previous year. Approximately 85.8 million new NFTs were also minted across Ethereum, Polygon, and Avalanche.
The year 2023 could potentially be a turning point for NFT wash trading, as the NFT market matures and regulators take action against the practice. With the increasing adoption of NFT technology and the emergence of new variations of NFTs, the market is expected to grow further. However, the issue of wash trading continues to be a significant problem, affecting investor trust and market stability.
New NFT variations like virtual real estate, digital art, and collectibles emerged, expanding the tech’s potential. Fan tokens, used in sports, let fans own part of their favorite team/athlete, further fueling the adoption of the growing technology. In its latest report, bitCrunch found that Yuga Labs contributed significantly to the total NFT sale volume. Bored Ape Yacht Club and Mutant Ape Yacht Club were the top performers in 2022, reaching a staggering $1.5 billion and $1.13 billion in sales volume, respectively. Other top-performing collections were Otherdeed, Azuki, CloneX, and CryptoPunks.
NFT wash trading refers to a form of market manipulation in the world of non-fungible tokens (NFTs), in which a trader or group of traders artificially inflate the trading volume and price of an NFT by repeatedly buying and selling it to themselves.
The goal of NFT wash trading is to create the illusion of high demand for a particular NFT, which can attract other buyers and drive up the price even further. This tactic can be used to manipulate the market and generate profits for the traders involved, but it can also harm other market participants who may be buying the NFT at an artificially inflated price.
In some cases, NFT wash trading may be facilitated by bots or other automated trading programs that can rapidly execute buy and sell orders to create the appearance of high trading activity. However, NFT marketplaces are increasingly cracking down on this behavior, and many prohibit wash trading or other forms of market manipulation.
To address this issue, NFT marketplaces need to take responsibility and enforce stricter regulations to prevent wash trading. As the market matures, investors will demand more transparency, ethical behavior, and security in their investments. NFT marketplaces that fail to comply with these demands may lose their credibility and ultimately their customers.
However, the odds of success are extremely low for NFT collections. Out of all the minted collections, only a mere 1.6% are able to reach a value of $10,000 or more. And only
0.17% of collections get a trading volume of $1 million or more, indicating the highly competitive and challenging nature of the NFT market. While there’s a belief that the NFT hype has died down, web3 enthusiasts are still actively investing in the market. However, it also includes people who have taken advantage of the highly speculative nature of the NFT market.
Wash trading, for instance, is one of the core problems the market is facing right now. NFT wash trading refers to the practice of artificially inflating the price of an NFT by repeatedly buying and selling it among a group of traders. The goal is to create the impression of high demand and drive up the value of the NFT, which can then be sold at a profit. While wash trading is a well-known problem in the financial markets, it has become increasingly prevalent in NFTs.
bitsCrunch recently highlighted the problem in its latest report that covers the topic in its NFT wash trade report for 2022. The company analysed three chains; Ethereum, Polygon, and Avalanche; and scanned over 252 triệu transactions to flag approximately 3.9 triệu transactions as wash trading. The report also revealed that over 333,000 wallets were involved in the wash trading activity.
Furthermore, the report also showcased more statistics on the rising wash trading activity amongst the top 5 NFT marketplaces by trading volume in 2022. LooksRare marketplace became the largest NFT marketplace by trading volume. However, a staggering 96% of the total volume traded in LooksRare was traded. In contrast, the trading volume of OpenSea for the year 2022 totaled 18.7B, out of which only $1.08B worth of volume was found to be traded. Check out the graph below representing the trading volume of the top 5 marketplaces and the wash traded volume.
While bitsCrunch’s report highlights the wash trading data for 2022, a recent report by CoinGecko has covered some interesting data on wash trading for the first two months of 2023. The Report by CoinGecko has also included the wash trading data of the Blur marketplace. This new marketplace has already surpassed other marketplaces like X2Y2 and LooksRare in terms of wash trading volume. According to the report, Blur saw wash trading triple last month once it introduced the $BLUR airdrop, which rewards users on transaction activity.
X2Y2, Blur, and LooksRare contributed the most extensive amounts to NFT wash trading volume in February 2023, at $0.28 billion (49.7%), $0.15 billion (27.7%), and $0.08 billion (15.1%) respectively.
Wash trading was at its peak during the first half of 2022, particularly Q1 seeing the most, accounting for 75% of all the wash trading volume of 2022. The first and second quarter accounted for 88% of the 2022 NFT trading volume and 90% of the 2022 NFT wash trading volume. So far in 2023, the wash trading volume slightly increased from $0.20 billion in December 2022 to $0.25 billion in January 2023 and $0.58 billion in February 2023. While there is a slight uptrend, the figures are far below the $11.56 billion worth of wash trading volume seen in January 2022. An uptick in the overall transaction volume of the NFT market primarily contributed to the uptrend.
Wash trading has drastically impacted investors. According to bitsCrunch, over 80,000 marketplaces wallets have been victims of wash trading in 2022, with potential losses surpassing $53 million. bitsCrunch has covered the topic in depth in its report, with an explanation of 18 types of wash trading patterns.
Both reports have highlighted that NFT marketplaces that offer reward tokens are primarily responsible for wash trading. Despite being aware of the manipulations, these marketplaces still need to take action and have instead rewarded wash traders with close to $600 million worth of reward tokens. This indicates a lack of ethics and regulation in the marketplace, which needs urgent attention.
The prevalence of wash trading highlights the need for regulation in the NFT market. Without self-regulation, regulators may step in with stricter rules that could impede the market’s growth and development. Participants must be aware of the risks associated with wash trading and remain vigilant. As we enter 2023, we may see increased regulation and scrutiny of NFT marketplaces and the trading practices that take place within them. This could be driven by several factors, including the growing popularity of NFTs and the increasing amount of money flowing into the space.
In 2023, another potential development that could help address the problem of NFT wash trading is the emergence of more transparent and decentralised marketplaces. These platforms would use blockchain technology to provide a tamper-proof record of all transactions, making it more difficult for traders to engage in wash trading without being detected.
Above analysis shows how the market fall did not affect the washtrade volume and the washtraders. Though the percentage of total and washtrade volume dropped in the mid of november and december is seen to increase since march. First quarter of 2023 showed an increase in washtrade.
Kiểm tra toàn bộ bitsCrunch 2022 Wash trade report here.
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To address the growing problem of wash trading in the NFT market, bitsCrunch has taken several steps to protect the ecosystem and its users. The company has increased efforts to identify and expose fraudulent activities like wash trading. It is also developing compliance tools to help honest NFT marketplaces detect wash traders and prevent them from gaining access.
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- nguồn: https://www.bitscrunch.com/blogs/explore-potential-nft-wash-trading
