Chainalysis is one of the leading crypto auditing firms that has issued a startling report regarding NFT. According to them, there is an increase in wash trading activity that involves NFT.
For those of you who don’t know, wash trading is the process of artificially inflating the price of an NFT via repeated trading. Previously, some publications had reported some cases of wash trading, but nothing concrete came out at that time. However, the Chainalysis report shows that this illegal activity is making ground in the NFT industry.
According to the report, 262 users have sold NFTs to self-funded addresses more than 25 times. Moreover, some of the active addresses have done this more than 800 times. However, the results with this procedure aren’t impressive for its owner or owners. A major reason for that is the exorbitantly high gas fees.
To keep this in perspective, that particular address has lost over $8,000 just due to gas fees.
All of this doesn’t mean that wash trading is not profitable in the NFT industry. If viewed as a whole, several addresses have earned millions with “significant” wash trading in NFT. Stats show that 110 addresses have made more than $8.8 million in profit from wash trading.
Unlike equity markets where wash trading is illegal, NFT markets don’t have the legislation. According to Chainalysis,
“NFT wash trading exists in a murky legal area. While wash trading is prohibited in conventional securities and futures, wash trading involving NFTs has yet to be the subject of an enforcement action.“
However, things could change pretty soon as NFTs become more and more popular.