Data platform CryptoSlam reported that around 95% of the activity recorded on LooksRare comes from wash trading. LooksRare is an NFT platform that was launched by two anonymous developers.
Reports have revealed that trading activity on the popular NFT platform LooksRare comes largely from wash trading. The platform recorded a total trading volume of $22.2 billion, with around 106,000 transactions.
Data platform CryptoSlam previously said that around 95% of the total activity on LooksRare is wash trading.
Wash trading is considered a form of “false trading”; and consists of circulating funds between users in a rather insignificant way. Indeed, these are not actual sales, but rather funds that flow back and forth between an individual or group who find themselves in both the position of seller and buyer.
Individuals make unethical profit from wash trading by artificially inflating prices, because NFTs give the impression of having value when they are likely the result of transactions. Likewise, the higher the number of transactions, the more commissions the platform receives.
LooksRare was launched by two anonymous developers in January 2022 and quickly grew as an alternative to NFT platforms such as OpenSea. NFT sales have declined this year, but there are still many users out there looking to make a profit, whether ethical or not.
The consequences of this activity could be severe, especially as regulators scrutinize this market more closely. In other markets, wash trading is considered illegal, and ever-increasing regulation could clamp down on similar instances within the crypto industry.
NFT markets show strong wash trading activity
Chainalysis, a company specializing in blockchain analysis and security, published a report on wash trading within the NFT market, pointing out that it had artificially driven up prices. In its February 2022 report, Chainalysis found that 262 users had sold NFTs to addresses they were associated with. Additionally, the company has found that money laundering is often done through the non-fungible tokens.
Interestingly, however, the majority of wash trades in NFT failed to turn a profit. On the other hand, the operations that turned out to be profitable made incredible profits, running into the millions.
Their success may not last, however, as Chainalysis points out that authorities are paying increased attention to the cryptocurrency market. The company therefore recommends that marketplaces discourage this type of activity, for the good of the industry as a whole.
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