According to an analysis published on blockchain data site Dune Analytics on December 16 by pseudonymous researcher hildobby, wash trading accounted for more than half (58%) of total NFT trade volumes on Ethereum in 2022. Wash trading peaked in January, accounting for more than 80% of total NFT trading volume that month.
The researcher used four filters to eliminate unusual trading behaviour that most likely indicated wash trading. First, they eliminated obvious NFT trades between the same wallet address.
Second, they examined back-and-forth trades of the same NFT between two different wallet addresses, which is one of the most common wash trading techniques.
Third, because of the unusual nature of the situation, if a wallet address purchased the same NFT three or more times, it was flagged as a wash trade.
Finally, if both the buyer and seller in an NFT transaction had wallets that were initially funded by the same wallet, it was obvious that there was a connection between them and the transaction was flagged as a wash trade.
According to the data, the NFT marketplaces LooksRare and X2Y2, which both offer token rewards for platform engagement, had the highest percentages of wash trading, at 98% and 87% of total volume, respectively.
(Reporting by Shikha Singh)
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