Non-fungible tokens (NFTs) have been making headlines in recent months, with high-profile sales and increasing mainstream interest.
However, the market has also seen a surge in wash trading, with the total volume reaching $580 million across the top six NFT marketplaces. This represents a 126% increase from the previous month’s volume, according to a new report by CoinGecko.
What is Nft Wash Trading?
Contents
Wash trading involves manipulating trading volume or price through repeated transactions, and it has become a growing concern in the NFT market.
The report suggests that the rise in wash trading correlates with the overall recovery of NFT marketplace trading volume, which hit $1.89 billion in February.
The six marketplaces included in the report are Magic Eden, OpenSea, Blur, X2Y2, CryptoPunks, and LooksRare.
The largest contributors to February’s wash trading volume were X2Y2, Blur, and LooksRare, with $280 million, $150 million, and $80 million, respectively.
The issue of wash trading is not new to the cryptocurrency space, but it is becoming increasingly prevalent in the NFT market. The lack of clear regulations in the industry makes it difficult to crack down on these practices.
While the report sheds light on the issue of wash trading, it’s important to note that not all NFT marketplaces engage in these practices. CryptoPunks, for example, did not see any NFT wash trading during the month of February.
How can AI Help Address Issues in the NFT Market?
Investor Mark Cuban has warned that wash trading could cause the next “implosion” in the crypto market. However, new artificial intelligence-based technology is being developed to troubleshoot issues in the NFT market, including wash trading.
As with any investment, it’s important to do your due diligence and understand the risks involved. Pro tip: When investing in NFTs look for reputable marketplaces and verify the authenticity of the NFT before making a purchase. Additionally, consider diversifying your portfolio to minimize risk.
Furthermore, it’s important to consider the long-term potential of an NFT before investing. While some NFTs have sold for millions of dollars, it’s important to remember that the market is still relatively new and volatile.
As with any investment, it’s crucial to have a well-researched investment strategy.
Is NFT Wash Trading Common?
In February 2023, NFT wash trading constituted 23.4% of the unadjusted trading volume across the six largest marketplaces.
This percentage has remained stable since November 2022 and marks a significant improvement from the 67.1% share recorded at the beginning of the previous year.
Despite this positive trend, X2Y2 and LooksRare still have high levels of wash trading, accounting for 85.0% and 80.8% of their unadjusted trading volumes, respectively.
Although their NFT marketplace token prices have fallen, the percentage share of wash trading has only decreased to 67.6% and 68.3%, respectively, since their trading rewards began.
However, other leading marketplaces have lower instances of NFT wash trading, with only 12.9% on Blur, 5.8% on OpenSea, and 1.4% on Magic Eden in the previous month.
As the new marketplace leader, Blur is increasing token airdrops to encourage activity, but its impact on NFT wash trading remains to be seen.
How to Approach NFT Investments?
One way to approach NFT investments is to focus on high-quality NFTs with unique characteristics, such as limited-edition artwork or collectibles with historical significance.
Another approach is to look for NFTs that are tied to specific events or trends that have long-term potential.
As the NFT market continues to evolve, it’s likely that regulations will be put in place to crack down on fraudulent activity and increase transparency.
In the meantime, investors should remain vigilant and do their due diligence before making any investments.
Also Read; How to find trending Nfts
In conclusion, while the surge in wash trading is a cause for concern in the NFT market, it’s important to remember that not all marketplaces engage in these practices. Investors should focus on reputable marketplaces and take a long-term approach to NFT investments.
By doing so, they can minimize risks and potentially benefit from the growth of this exciting new asset class.
So, we hope you enjoy the content, if you’re new to the Nft world then we highly suggest you follow Nft Giant to learn more about Nft tips and stay up to date with the trending nft news.
See you in the next important news!
