- NFT minting and trading posted impressive returns in 2022.
- The sector still grapples with high incidences of wash trading.
Non-fungible tokens (NFTs) minting and trading on the Ethereum platform were hugely profitable ventures in 2022. The two activities generated a total of $23.7 billion, according to data presented by CryptoMonday.de. This staggering figure indicates that NFTs have maintained their value since they first appeared in 2020.
This was quite a substantial amount for the year, especially considering that the crypto market was bearish throughout this period. The spike in profit was most prominent between January and May when NFT minting and trading peaked.
Explaining the Numbers
CryptoMonday's CEO, Jonathan Merry, has attributed these impressive returns to the carry-on effect of the 2021 bullish run in the cryptosphere. He explained:
Ethereum, the base currency for these NFTs, was on a tear in 2021, attaining its ATH in November of that year. Its incredible run through the year provided the traction that sustained the NFT market up to mid-2022 despite the bearish trends beginning to emerge then.CryptoMonday CEO, Jonathan Merry
Yuga Labs also significantly impacted the NFT volumes early in May when it launched Otherdeed NFTs for its Otherside Metaverse. The launch was an unprecedented success as OpenSea, the leading NFT marketplace, posted trading volumes worth $476M, a one-day record, which helped the platform attain a monthly record of a staggering $1.6 billion!
The plummeting of the crypto market in May ended that positive run. NFT values went careering in response leading to a sharp drop in monthly volumes from roughly $3.3B to slightly above $1.0B in June. Further slides in cryptocurrency prices have seen the marketplaces struggle to attain the one million dollars mark.
NFT Wash Trading Remains a Concern
Despite the sector's impressive showing, the prevalence of NFT wash trading remains a major concern. Crypto researcher Nansen estimates that the vice accounted for $32.9B of the reported $56.6B gained from NFT mints and trades on ETH in 2022. This figure is much higher than the $23.7B realized from organic minting and exchange activity.
Nansen also identified LooksRare as the platform most culpable for this manipulation, with most wash trading occurring between mid-January and mid-February 2022. This indicates that despite current regulatory efforts, these practices are still ongoing in many platforms due to limited oversight or enforcement.
NFT wash trading can lead to market distortions, price movements that don't reflect actual market conditions, and potential losses for unsuspecting investors. Therefore, platforms must institute proper regulatory measures to ensure the integrity of NFT markets and protect vulnerable investors from falling victim to fraudulent schemes such as these.
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