Global NFT sales exceeded $850 million in October with nearly 3 million total transactions. We looked at NFT wash trades last month, and that research allowed us to dig deeper into the numbers.
Here are the trigger points where I would say trading is getting more fake:
- Despite the bad market conditions, we continue to see a large number of unique buyers and sellers. There were over 1 million unique buyers and sellers in October. Both buyers and sellers increased compared to September.
- The number of unique buyers and sellers doesn’t seem to match As sales and transactions growNearly 1 million users brought in over 4 million sales in May, compared to less than 250,000 in October. To me, it seems unlikely that market demand will increase due to the small amount of sales that have been transacted.
To explore this further, we spoke to two centralized exchanges that operate NFT marketplaces. According to the exchange, about 80% of new buyers keep their NFTs in wallets rather than selling them. Holding these assets seems like a smart move as the market is very unfavorable.
So where did these unique buyers and sellers come from? I spoke with Footprint Analytics and gave my opinion. I realized that the stats I was looking at were too big. There are multiple chains involved and it’s difficult to track them all. We agreed to only work on Ethereum-based marketplaces as an example to dig deeper because they are the most popular.
Here are the findings:
Wash trades make up almost half of all NFT trade volume, according to Footprint Analytics filters.
Footprint Analysis – ETH NFT Market Overview (with wash trading filter)
Traders seeking to artificially inflate the price of collections or gain market trading rewards generated $389 million of wash trades out of total NFT volume of $758 million in October . The volume of wash trades in the NFT market is now nearly half of the organic trades. Wash trading users account for nearly 46% of all users.
Wash trading is a form of market manipulation in which investors buy and sell the same financial instrument at the same time, creating misleading and artificial activity in the market.. In the NFT industry, what most people imagine NFT trading as buying NFTs for speculative purposes, and the behavior that actually underlies the market (hundreds of insiders transferring NFTs between their wallets). It creates a great dissonance between
There are several indicators to identify suspicious trading activity.
Signals and indicators include:
- Expensive NFT transaction with 0% creator fee
- Specific NFT IDs with more than normal purchases per day
- NFTs purchased by the same buyer address in a short period of time
The incentive for wash trading is to earn platform rewards and create an appearance of asset value or liquidity. There is no way to prevent or discourage wash trading in his NFT marketplace today, so people have a very erroneous view of the amount of organic and genuine trading activity in the industry.
For example, 81% The percentage of all transactions on X2Y2 (one of the top 3 NFT marketplaces) is filter Apply. The main reason for X2Y2 wash trading is the volume-based daily trading rewards. The greater percentage of volume a user contributes to her X2Y2, the greater share of daily trading rewards the user earns. Looking at the individual collections, we see a similar breakdown.For example, out of his $1.1 billion for Dreadfulz Total, $1.131 billion Flagged as a wash trade.
Analysts and writers who do not understand the dynamics of this wash trading risk greatly misinterpreting the current market.For example what is this business 2 community About Terraforms by Mathcastles wrote on October 12th:
“So far this year, the non-fungible token collection continues to show strong resilience amid the current general crypto market downturn. Here are some of the best-selling NFT collections this week: 1. Terraforms regains top spot Mathcastles’ non-fungible token (NFT) collection, Terraforms, has regained the top spot after falling short of last week’s top 10 selling list. The sales volume is 1,814 ETH.”
The next collections listed in the article were BAYC and CryptoPunks, which had very few wash trades. This will give the reader the impression that Terraforms is a more popular collection than those good ones, when in reality there are few organic deals.
By filtering Wash Trading trades, traders, analysts and investors can more accurately assess NFT assets and the industry. Having accurate datasets and using them are two different things. My role here is not to whistleblower or break NFT myths. I am here to share my knowledge and tell everyone my side of the story.
I would like to use this article to request data analysis for the CEX NFT Marketplace. Binance or Bybit NFT Marketplace would be ideal.
This is a guest post by Andy Lian.
Guest post by Andy Liang, Mongolian Productivity Organization
Andy Liang is a business strategist with over 15 years of experience in Asia. Andy has worked in a variety of industries for local, international and public companies. With his recent foray into the blockchain scene, he has managed some of the most prominent blockchain companies in Asia. He believes blockchain will transform traditional finance. He is currently the Chairman of BigONE Exchange and Chief Digital Advisor to the Mongolian Productivity Organization.