What is wash trading and money laundering in NFTs?

NFT wash trading is a problem for investors, the global community, collectors and traders as these participants use less liquid, non-fungible tokens to manipulate an asset’s price.

Due diligence has become more difficult as investors have been forced to rely on measurable statistics and make poor investment decisions. In order to encourage NFT investments and prevent NFT fraud, discrepancies in the data must be investigated by specialists. Additionally, NFT crimes hit the NFT community the hardest. Regulators and mainstream financial services advocates can now use wash trading to fight decentralization.

Collectors and dealers are also unable to make an informed judgement. When fallacious facts and history mislead people about an artwork or collectible, it’s easy for them to make hasty decisions. So is there any way to even spot the NFT markets affected by wash trading?

There is no price or volume history associated with new coins when they are launched. As a result, developers or other insiders may engage in wash trading to mislead participants about the true value of the coin. Therefore, avoid investing in such projects.

Additionally, many NFTs have no trading volume or investor interest. As a result, NFT owners can easily participate in wash trading to lure naïve buyers into buying the NFT at an exorbitant price. Therefore, avoiding newly issued small-cap cryptos and NFTs is the number one way to prevent wash trading.

A trader needs to choose more established cryptocurrencies with a higher volume in order not to become a victim of wash trading. The broader the market, the more money scammers have to manipulate it. For example, already established cryptos like Bitcoin (BTC) or Ethereum, which are worth hundreds of billions of dollars, make crimes like wash trading incredibly challenging.