Do you know money laundry and wash trading are the two most significant waves of abuse of NFTs? Research shows that as more and more people are joining the NFT space, the crime rate of money laundry increases.
Wash trading is one of the developing abuses of NFT because NFTs are operating on the unregulated territory of the crypto market. Although NFTs are linked to the crypto industry by virtue of currencies and blockchain storage, however, it is riskier. These risks make NFTs a perfect market for relative players- including those with criminal intentions.
what is Wash Trading in the NFT Market?
Wash trading is a form of market manipulation where the selling party of a financial asset is also the buying party. This move is to mislead the marketplace by creating an artificial value/utility for the item.
For NFTs trading, this market manipulation is to deceive, lure, and inflate the worth of the NFTs. It is also a trick to increase trading volume for a project.
Can NFTs utility be manipulated?
Wash traders create multiple wallets to trade an NFT and raise the floor price. The idea is to draw unsuspecting collectors to the project before pulling the rug. Rug pull is when creators of a particular project elope with investors’ funds and abandon the project. This is very prevalent in the NFT market.
They do this by selling the NFT to many wallets they control. Then they repeat this to achieve maxim effect. It is easy to perpetrate because many NFT platforms and wallets do not require KYC to interact.
Should you trust every potential NFT with a skyrocketing utility?
You shouldn’t. You should research the project, understand the team, and the road map before deciding on a purchase. NFTs, like crypto coins, can also be used as a pump and dump scheme.