14 Mar 2023
In the absence of strict regulatory control, many NFT traders are tempted to engage in wash trading – the practice of simultaneously and repeatedly buying and selling the same digital asset to manipulate the market to their advantage.
They manage to artificially create high demand, increase trade volumes, inflate prices, promote a false idea of the asset’s value and liquidity. Some other strategies are tax loss harvesting and trading for token rewards.
Analytical data reveals that wash trading is a huge issue across major NFT marketplaces.
Educating ourselves on this form of market manipulation, analyzing common patterns (e.g. sudden spikes in trading volume or price), doing research to get some valuable insights (e.g. current demand), using reputable marketplaces, seeking professional financial advice are all effective ways of spotting the signs of wash trading.