Ethereum-Based NFT Marketplaces See Drop in Wash Trading

Recent data reveals a significant drop in the volume of wash trading on Ethereum-based non-fungible token (NFT) marketplaces, marking a positive trend in reducing market manipulation. Wash trading, a deceptive practice where traders artificially inflate an asset’s price or simulate high trading liquidity, saw a marked decrease on January 9 and 13th, 2023. The wash trading volumes fell to a mere 1.8% of the total USD volume traded, a sharp contrast to the 36.2% recorded on January 1, 2023.

Historic Low in Wash Trading

This reduction in wash trading volumes signifies the lowest rate since May 1, 2022, when wash trading accounted for only 0.35% of the volume. The Block Pro’s Data Dashboard, a trusted source for market data, reported this significant shift in Ethereum-based NFT marketplace activities.

Factors Contributing to the Decline

The decline in wash trading can be attributed to several factors, including changes implemented by NFT platforms such as LooksRare, X2Y2, and Blur. These platforms have taken steps to discourage wash trading by either eliminating or reducing trading rewards programs that incentivized such deceptive practices. Furthermore, the devaluation of several NFT marketplace tokens has also had an impact on curbing wash trading activities.

An Insightful Perspective

Rebecca Stevens, Senior Research Analyst at The Block, offered insights into these market changes. She highlighted the efforts by exchanges to filter out wash traders and reduce the attractiveness of such activities. The drop in wash trading volumes not only reflects the effectiveness of these measures but also represents a significant step towards a more transparent and fair NFT marketplace.