Data shows increase in NFT wash trading by 126% in February

Research has found that the overall NFT wash trading volume has increased continuously for the fourth month on the top six marketplaces in February 2023. An increase of 126.0% is represented by last month’s $0.25 billion in terms of NFT wash trading. 

This gain in NFT wash trading is the result of a recovery in trading volume, which represented four consecutive months of expansion to hit $1.89 billion last month. NFT wash trading was considerably below $11.56 billion in January last month, at 5.0% of the monthly volume. 

3/ However, NFT wash trading is still significantly below the $11.56 billion recorded in January 2022, at just 5% of the monthly volume during the previous NFT bull market.

— CoinGecko (@coingecko) March 20, 2023

Wash trading has been prevalent on some particular marketplaces. For instance, last month, Blur, X2Y2, and LooksRare gave the maximum quantities of NFT wash trading volume at $0.15 billion (27.7%), $0.28 billion (49.7%), and $0.08 billion (15.1%), respectively.

The reason behind this could be the activity of users incentivized so as to boost their trading volumes since these NFT marketplaces offered rewards for transactions.

In May 2022, X2Y2 began providing $X2YX trading rewards, and ever since, it has had one of the highest NFT wash trading volumes, with each month’s total wash trading being around 40%. In July 2022, the wash trading of X2Y2 was the highest at $0.64 billion.

Before that, LooksRare made around 90% of each and every NFT wash trade from January to April 2022. LookRare made $11.33 billion in January’s NFT wash trading despite introducing $LOOKS trading rewards almost at the end of the month. 

The arrival of the X2Y2 rewards program has led to a fluctuation in wash trading on LooksRare, with contributions ranging between 15-50% of entire volumes across marketplaces.

Blur marketplace experienced wash trading tripling in February 2023 after launching the $BLUR airdrop. 

While OpenSea contributed $42.57 million in wash trading, Magic Eden’s contribution was as little as $0.59 million. However, no wash trades were seen on CryptoPunks. 

NFT wash trading accumulated 23.4% of unadjusted trading volume on the six biggest marketplaces together, as of February 2023. Since November 2022, NFT wash trading volume’s percentage share has balanced around such levels and shown a major improvement from the 67.1% share that was recorded at the start of 2022. 

The majority of transactions on both X2Y2 and LooksRare were wash trades and represented 85.0% and 80.8% of unadjusted trading volumes in February 2023, respectively. The beginning of their trading rewards has led to a decline in the percentage share of wash trading as low as 67.6% for X2Y2 and 68.3% for LooksRare, thanks to the decrease in their token prices. 

On other major marketplaces, NFT wash trading is not quite common and accounted for 1.4% of unadjusted trading volume on Magic Eden, 12.9% on Blur, and 5.8% on OpenSea last month. 

Blue has doubled down on token airdrops with the goal of boosting activity, and its effect on NFT wash trading is yet to be seen. A study calculated the overall wash trading volume of the top six marketplaces based on data from Footprint Analytics from January 1, 2022, to February 28, 2023.

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