Wash Trading Accounted For Over Half Of NFT Volume in 2022: Report

Token Incentives From LooksRare and X2Y2 Drove Surge In Activity

By: Owen Fernau Loading...

Wash Trading Accounted For Over Half Of NFT Volume in 2022: Report

January of 2022 could be called the glory days of NFT trading.

Trading volumes spiked to roughly $20B on the month, an all-time high and level that many participants in the space undoubtedly wish to return to.

However, new findings by hildobby, a pseudonymous researcher known for their proficiency with on-chain analytics, tell a different story about that time — roughly 80% of trades in January 2022 were wash trades.


“The boom in wash trading really made life tough for us data analysts, since it skews basic statistics that we use to track marketplace usage,” hildobby wrote.

Wash trading occurs when people trade assets between their own accounts, usually to make interest in a given project appear higher than it really is. In this case, NFT traders did so to reap the rewards of token incentives which some marketplaces showered their users with in exchange for activity.

The main venues for wash trading are LooksRare, where the transactions constitute over 98% of volume, and X2Y2, with 87%.

Incentivized Trading

Both LooksRare and X2Y2 offered generous token incentives when they launched, in a bid to gain market share. Naturally, NFT traders gamed the system by wash trading NFTs like Meebits, which had no royalties at the time. The Defiant reported on the phenomena in January.

However, hildobby’s methodology allowed the analyst to quantify the overall amount of wash trading in NFTs. The results aren’t pretty — of the $30B in NFT cumulative trading volume, 44.5% appear to be wash trades.

Artificially inflating volumes is nothing new — the Commodity Exchange Act made wash trading illegal in the United States in 1936. Despite the law, there have been infractions — the Securities and Exchange Commission charged two individuals for wash trading meme stocks as recently as 2021.

Hildobby’s report is not without bright spots — wash trading accounted for only 2.3% of volume on OpenSea, the leading NFT marketplace.

Another silver lining from hildobby’s findings is that the NFT market is down, but not quite as much as previously supposed. Using the analyst’s wash trading filter shows that the all-time high for organic weekly trades came in late August 2021, rather than in January 2022, as is broadly accepted.


Relative to the organic weekly high of $1.8B in August 2021, NFT trading volume is down 89.5% as of late December. While that’s still a huge drop, it’s not quite the 95% bloodbath in comparison to the $5B-plus weeks the NFT space saw in January.


Hildobby filtered out wash trades in four different ways. First, the analyst nixed all NFT purchases where the buyer and seller were the same wallet, an obvious sign that the trade isn’t organic.

Second, hildobby filtered out all trades which went back and forth between two wallets, another sign of inorganic demand.

Third, the analyst took out wallets which bought the same NFT three times or more.

And lastly, hildobby filtered out trades where both the buyer and seller were funded by the same wallet.

Hildobby joined venture firm Dragonfly in May, largely on the back of their work creating community dashboards on Dune Analytics, an on-chain data platform.