Wash trading is a practice in which an investor buys and sells securities multiple times to create artificial demand in the marketplace. This results in a glut of misleading information in financial markets.
NFT sales supported by blockchain technologies skyrocketed over the last year, resulting in the development of new marketplaces in this sector. LooksRare is one of those and was launched on January 10, 2o22. Within 3 days of its launch, it experienced record trading volumes in the neighborhood of $400 million. This volume was higher than trading numbers experienced by its nearest and well-known rival, OpenSea. Suspecting that clever NFT traders have been using this platform to generate huge revenue volumes by wash trading digital collectibles.
Wash trading has been illegal in the US since 1936. This practice has found its way into the unregulated crypto sector. Data research tools reveal that the number of users and daily transactions on LooksRare are just 2% compared to OpenSea. But trading volumes are triple those of OpenSea. Analytics firm, CryptoSlam claims to have identified more than $8 billion worth of wash trading transactions on this new platform.
An official statement on the LooksRare blog says that the cost of trading, related royalty and platform fees are too high. There is little scope to incentivized wash trading – this, in diametrically opposed information being put out by analytics platforms. All NFT collections in the Ethereum blockchain are available on the LooksRare marketplace. Buyers and sellers of NFT collections are also being rewarded for using the platform.