24. September 2023

NFT Wash Trading: Is Your Trading Volume Fake?

  • What is NFT Wash Trading? A wash trade is any exchange where a single trader is both the buyer and the seller in a transaction, done to create misleading market data and inflate trading volumes.
  • Why Does Crypto and NFT Wash Trading Happen? Despite being a moral and an ethical gray area, NFT wash trading does have its benefits. It helps users artificially inflate their figures and receive greater rewards.
  • What Is the Risk of Participating in Wash Trading? Wash trading can attract the scrutiny of regulators as well as invite potential legal action from irate investors or exchanges.

Introduction to NFT Wash Trading

NFT wash trading has become increasingly popular due to generous $BLUR token airdrops and 0% fees on leading NFT marketplaces. While it looks like these marketplaces are offering deeper liquidity than ever before, it’s easy to spot wash trades thanks to blockchain’s transparent nature. As non-fungible tokens evolve into financial instruments, regulators are paying close attention to these markets. What is wash trading exactly, why do people bother with it, and what’s the risk?

What Is NFT Wash Trading?

A wash trade occurs when a single trader acts as both the buyer and seller in a transaction. This practice creates false data points which can be used to manipulate markets or boost trading volumes. It isn’t exclusive to digital currencies; stocks and other traditional assets can also be subject to this kind of activity. For example, imagine you own a cryptopunk – you list it for sale on an NFT marketplace like Opensea or Blur but buy it using another cryptocurrency wallet that you control. From an outsider’s perspective, there was an actual trade – yet you still own your cryptopunk and crypto used for payment! Chainalysis reports some wallets have made over 800 sales to self-financed wallets — so why bother with this type of activity?

>Why Does Crypto & NFT Wash Trading Happen?

Despite its questionable morality, there are incentives for participants in such activities — particularly when platforms reward traders based on their volume metrics. Forbes analysis suggested over 50% of all Bitcoin trade volume may be fake – so what would motivate someone to go through with such practices? Token Airdrops are one way blockchain protocols incentivize users since they generally provide more rewards if bigger numbers are achieved by individual traders or teams.

>What Is The Risk Of Participating In Wash Trading?

> Although participants may earn greater rewards by purposely inflating their numbers, there are risks associated with wash trading — beyond merely attracting unwanted attention from regulators or exchanges who may pursue legal action against those engaging in such activities. Additionally, due diligence should always be practiced when considering taking part in any kind of investment or activity that could potentially harm others financially or otherwise violate laws/regulations.


> While some might view wash trading as savvy business strategy (and at times even clever market manipulation), the ethics involved should not be overlooked nor taken lightly given its potential ramifications in those seeking short-term gains without regard for long-term consequences.