NFT Market Soars Amid Wash Trading Concerns

Despite the year-long crypto winter, 2022 witnessed a staggering increase in the new Non-fungible token (NFT) collections across Ethereum, Polygon, and Avalanche. Over 610,000 new NFT contracts were created, reflecting an 860% jump from the previous year.

This massive growth led to the creation of over 85 million new NFTs, with the market sales volume reaching $54 billion. The sudden rise in NFT gaming and sports collectibles primarily fueled this trend.

Yuga Labs, the creators of the wildly popular Bored Ape Yacht Club (BAYC) collection, enjoyed a trading volume exceeding $4.4 billion. However, the market’s explosive growth attracted bad actors, resulting in a significant surge in NFT wash trading activity.

The “BitsCrunch NFT Wash Trade Report for 2022″ by bitsCrunch Research revealed a 25x surge in NFT wash trading, hitting nearly $33B in 2022. Wash trading uses fake transactions, copy-minting, and other methods to artificially boost prices for NFTs or collections.

The report shows 59% of 2022’s $54B NFT volume on Ethereum as wash trades. Removing them reveals top collections like BAYC, Mutant Ape Yacht Club, Otherdeed, and Azuki, totaling $21.7B in market activity.

Wash Traders Skew Top NFT Collections And Platforms

Including wash trading presents a vastly different picture of the 2022 NFT market. Total sales surpass $54 billion, bringing collections such as Terraforms, Meebits, and Dotdotdot to the forefront. Wash traders showed a clear preference for specific collections.

LooksRare, the top NFT marketplace among the five leading platforms, emerged as the wash traders’ hub, with $26.2 billion (96%) of its $27.3 billion total sales suspected to be wash trades.

The loyalty token offered by LooksRare, based on NFT trade volume, is cited as the primary cause. Meanwhile, out of OpenSea’s $18.7 billion in total sales volume, only $1 billion is estimated to be wash trade.

“Sharks,” NFT traders with over $1 million in wash trades, flocked to LooksRare. The report highlights two sharks responsible for 18% of total wash trading activity on the platform, totaling almost $5 billion.

In 2022, there were 613,000 new NFT collections. Interestingly, only 10,000 of them, or 1.6%, achieved notable success. Given the highly competitive environment, thorough research and analysis are essential before investing in NFT collections.

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While annual reports offer insights into the NFT market. However, users need dependable tools. These tools should detect and flag fraudulent activities. BitsCrunch is collaborating with industry stakeholders to establish a sustainable ecosystem and restore confidence in the thriving NFT market.