Analysts fear NFTs are being used for wash trading

As NFT trading volume climbs higher, analytics firm assesses possibility of wash trading

Non-fungible token marketplace Open Sea has recorded $1.9 Billion in NFT sales so far in August 2021, nearly ten times the volume recorded in March. Ian Kane, a spokesman from DappRadar who tracks NFT sales, said: 

What we have seen are a few NFT collections popping up in the last few weeks that have been very successful at launch and sold out. That activity has then filtered over to OpenSea, where buyers look to flip their NFTs for a higher price.

Analyzing NFT sales and the success of new token creators, Nansen, a blockchain analytics firm, pointed out that "something appears amiss."

Nansen has observed that NFTs are "spotted by profit-seeking practices." Though there is no incriminating evidence yet, the firm has noted that it is likely that they may uncover further details in the rigorous study. 

Based on transaction patterns noted by Nansen, new token founders are buying large sums of their assets at a low price, which implies they are deliberately purchasing and selling the same back and forth. This creates an illusion of demand through "wash trading."

Ling Young Loon, a Nansen analyst, was quoted:

While something appears amiss, it definitely isn't incriminating evidence of wash trading because they aren't being sold directly to each other… the wallets that they eventually sell to may be related, but that would require a much more rigorous study.

Following payments giant Visa's purchase of a CryptoPunk – one of the oldest NFTs in circulation – for $150,000, several Chinese investors have purchased non-fungible tokens as digital art and collectibles.

Chinese Journalist Colin Wu reported purchases by Meitu founder Cai Wensheng. Meitu is a Chinese photo touch-up application.