According to Dune, a crypto analytic firm, most NFT trading was done in a wash trading manner, leading investors to purchase these non-fungible tokens due to the high trading volume attached to each NFT.
Fake NFT Trading Volumes?
NFT marketplaces were discovered to have used the strategy of high trading volumes to entice investors into investing in various NFT artworks via a wash trading method.
Wash trading is a crypto space manipulation technique in which art creators buy and sell back their artwork into the market space to increase trading volume and floor price, luring investors to buy their arts due to high volume.
This strategy was seen to mislead investors who were looking to profit from these non-fungible digital assets.
When investors see an NFT with a high trading volume, they are enticed to invest in the hope that more investors will invest and the floor price will rise, earning them a massive return on their investment.
This trader or creator of the NFTs sometimes create multiple accounts on the platform and begin trading in these NFTs with his/her own funds, buying and selling at different prices in order to increase his sales and trading volumes. And as investors see it, their no FOMO (Fear of Missing Out) and staying safe habits deteriorate as they rush to ape in and profit.
Also read:Wash Trading On ETH And SOL Networks
This technique, known as wash trading, gained a lot of traction in 2019 as NFT creators saw it as a risky but creative way to gain traction and earn massive returns.
Some creators go above and beyond by enticing investors with token rewards for purchasing one NFT, among other things.
This Dune firm went on to speculate that the majority of this wash trading was done on the Ethereum network, and that these traders sometimes lost their profits due to exorbitant gas fees.
However, this did not prevent this technique from being used; it soon made its way down to the Solana blockchain, where NFTs were gaining traction and outperforming ETH.
This analytics platform went on to mention some NFT Platforms that relied on wash trading to boost their activities and trades, one of which was the LooksRare platform.
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