NFT ‘Wash’ Trading – The Fake Deals Keeping Prices Artificially High

• Trades in non-fungible tokens (NFT) come into the spotlight
• Reports suggest artificial trading activity is taking place
• The scheme aims to keep prices high and lure in new unsuspecting bidders

The fastest-growing NFT marketplace Blur has come into the spotlight with claims that artificial trading activity on the platform keeps prices and trade volumes high. Sceptics claim that up to 80% of the trading volume in some NFTs is ‘inorganic’, part of a market manipulation scam designed to lure in newbies.

What is ‘Wash’ Trading

Wash trading involves buying and selling an asset in quick succession to create a track record of trading activity. It originated in the US stock markets in the early 1900s as it offered a way to crystallise losses on positions for tax purposes.

In the case of NFTs, little risk is taken on by the buyer, who can set the price of both transactions. But for an unsuspecting new entrant to the market, the wash trade can suggest a digital asset is becoming more popular. The problem is that once the NFT is bought, often at an overinflated price, the other traders apparently interested in the market disappear.

How Big is the NFT ‘Wash’ Trading Problem?

NFTs started gaining momentum in terms of mainstream investing in 2017 and took off in 2021. The dedicated marketplaces have now reported $73.8 billion worth of trading activity has taken place. Data provided by Dune Analytics suggests that more than 42% of the volume ($31.2bn) can be attributed to wash trading.

Research carried out by CryptoSlam into trading activity at Blur suggests that in recent months up to $577m, or 80% of NFT trades have been ”inorganic”. Other NFT platforms are also accused of supporting manipulative practices; LooksRare and X2Y2 are estimated to have 98% and 85%, respectively, of their total trading volume currently flagged as suspicious.

How to Avoid NFT ‘Wash’ Trading?

The nature of the crypto markets does leave the door open to those who argue that the problem is not as bad as it appears, and analysis does point to wash trading being more prevalent in some markets. More experienced NFT investors highlight that it is more of a concern in markets which attract novice investors and collectors.

That would tie in with the classic approach of scammers who take advantage of those with less than complete knowledge of how a market works but doesn’t remove the challenges facing those considering investing in NFTs for the first time.

People Also Read:

• iEarn Bot – One of the Largest Scams to Date Unravels
• Binance Pulls the Plug on UK Cash Deposits – and Withdrawals
• Football Star jailed for Defrauding Friends and his Church

---

Crowdsourcing information about scam brokers can help others avoid falling into the traps set by disreputable brokers and you can share your experiences here. If you would like to know more about this particular topic, or have been scammed by a fraudulent broker, you can also contact us at [email protected]

About the author: Justin Freeman

Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds. He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.

Share

Tweet

Safest Forex Brokers 2024

	Broker	Info	Best In	Customer Satisfaction Score
#1	73% of retail CFD accounts lose money. Founded: 2014	Global Forex & CFD Broker	Best Trading Conditions Visit broker	4.9
#2	Your capital is at risk Founded: 2014	Global Forex Broker	BEST SPREADS Visit broker	4.8
#3	Your capital is at risk Founded: 2006	Globally regulated broker	BEST CUSTOMER SUPPORT Visit broker	4.9
#4	81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Founded: 2008	Global CFD Provider	Best Trading App Visit broker	5
#5	Between 74-89 % of retail investor accounts lose money when trading CFDs Founded: 2010	Global Forex Broker	Low minimum deposit Visit broker	4.9
#6	76% of CFD traders lose money Founded: 2007	Global CFD & FX Broker	ALL-INCLUSIVE TRADING PLATFORM Visit broker	4.9
#7	Your capital is at risk Founded: 2009, 2015 and 2017	Global Forex Broker	Low minimum deposit Visit broker	5
#8	Your capital is at risk Founded: 2006	CFD and Cryptocurrency Broker	CFD and Cryptocurrency Visit broker

Forex Fraud Certified Brokers

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.