Chainalysis, one of the leading blockchain and cryptocurrency auditing firms, has released a report indicating significant wash trading activity involving NFTs. In these operations, some actors effectively sell their assets to themselves with the intention of selling the floor price of the NFT at a higher price later. However, this washing activity has not always been profitable due to the cost of gas.
Wash trading involving NFTs is genuine, says Chainalysis
A new report released by Chainalysis, one of the leading auditing and tracking firms in crypto, has detected “significant” wash activity in the NFT market. These activities are aimed at making NFTs more valuable by giving the appearance of past sales. Using blockchain analysis, the company was able to trace 262 users who have sold NFTs to self-funded addresses more than 25 times.
The most active addresses in these activities have performed this process over 800 times, but have not yielded great results for the owner or owners. Due to gas charges, the transaction price to allow these movements was much higher than the profit realized for the sale. Reportedly, the address has lost over $8K.
Profitability and legal status
However, if seen as a whole, wash trading activity involving NFTs has been profitable, with multiple addresses earning millions. The company found that 110 addresses involved in these activities made profits of over $8,800,000 from wash trading.
According to the firm, the legal status of wash trading in the NFT markets is unclear. Chainalysis states:
NFT wash trading exists in a questionable legal area. While wash trading in traditional securities and futures is prohibited, wash trading involving NFTs is not yet the subject of an enforcement action.
However, this may change, as NFTs become more popular. With the explosion of NFTs during 2021, and many companies starting to integrate NFTs into their business models, the phenomenon of wash trading may begin to attract the attention of regulators around the world.
The company also detected limited instances of money laundering using NFTs, mostly coming from addresses related to the scam. Chainalysis described this activity as a “bucket drop” compared to the amount laundered using the cryptocurrency during 2021.
What do you think about Chainalysis’s report on wash trading related to NFTs? Tell us in the comments section below.
image credit: Shutterstock, Pixabay, WikiCommons
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell any products, services, or companies, or a recommendation or endorsement of any products, services or companies. Bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use or reliance on any materials, goods or services mentioned in this article .