• A recent report compiled on blockchain data site Dune Analytics has revealed that wash trading accounts for over half (58%) of the total NFT trade volumes on Ethereum in 2022.
• The researcher used four filters to weed out odd trading behavior that most likely pointed to wash trading.
• The report shows that over $30 billion of NFT trading volume from all time could be linked to wash trading, which represents about 1.5% of all trades that have taken place on Ethereum.

The non-fungible token (NFT) market has recently been plagued by wash trading – a form of market manipulation where the buyer and seller in a transaction are the same or collude together. To better understand the prevalence of this issue, a recent report was compiled on blockchain data site Dune Analytics. The analysis revealed that wash trading accounts for over half (58%) of the total NFT trade volumes on Ethereum in 2022.

The researcher used four filters to weed out odd trading behavior that most likely pointed to wash trading. First, they filtered out obvious trades of NFTs between the same wallet address. Second, they looked at back-and-forth trades of the same NFT between two different wallet addresses – one of the most common wash trading tactics. Third, if a wallet address had purchased the same NFT three or more times, it was flagged as a wash trade because of the unlikeliness of the situation. Finally, if a buyer and seller in an NFT transaction had wallets that were first funded by the same wallet, it was obvious that there was a connection between them and was therefore flagged as a wash trade.

The report found that wash trading was most prevalent in January, accounting for over 80% of the total NFT trading volume that month. In total, over $30 billion of NFT trading volume from all time could be linked to wash trading. This number is staggering, though it only represents about 1.5% of all trades that have taken place on Ethereum. This data shows that the majority of NFT trades are legitimate, but happen at a generally lower price than the wash trades.

Given the prevalence of wash trading within the NFT market, it is more important than ever to be vigilant when engaging in any NFT transactions. It is important to research the details of any potential transactions and the parties involved in order to ensure that the transaction is legitimate. Additionally, it is important to be aware of the potential risks of wash trading and to avoid engaging in any suspicious activities. With these precautions, NFT traders can protect themselves and the NFT market from market manipulation and malicious actors.