NFT marketplaces use token reward trading strategies to entice traders, boost volume, and appear to be the most successful platforms.
A recent report published by blockchain analytics firm Dune revealed that nearly 60% of non-fungible token (NFT) trading volumes this year were wash trades.
According to Dune, wash trades started gaining traction in the crypto industry in 2019 but became pertinent to the NFT space in 2022.
The analytics firm noted that NFT wash trading is boosted by enticing traders with token rewards due to the high competitiveness of the space and the frequent launch of new platforms.
The most common wash trading methods involve investors trading their NFTs between two or more wallets, which they control, for the highest amount of Ether (ETH) possible. They aim to accumulate token rewards more valuable than the gas fees spent.
In February, blockchain analytics firm Chainalys is reported that about 110 wash trading addresses had generated $8.9 million in profit. Notably, a significant number of such wallets lost money to transaction fees. However, the profitable addresses exceeded the losses of the unprofitable ones.