THE NFT GRIFT?
Wash Trading, PUMPs, and money laundering are tweaking the NFT market and confusing brands and IP Owners.
Big money or an immature marketplace loaded with land mines.
A great report by nonfungibletokens.com was released that details the amount of “Wash Trading” in the NFT space.
What Is Wash Trading?
“Wash trading is a process whereby a trader buys and sells a security for the express purpose of feeding misleading information to the market. In some situations, wash trades are executed by a trader and a broker who are colluding with each other, and other times wash trades are executed by investors acting as both the buyer and the seller of the security. Wash trading is illegal under U.S. law, and the IRS bars taxpayers from deducting losses that result from wash trades from their taxable income.” (https://www.investopedia.com/terms/w/washtrading.asp)
The textbook definition is accurate, but you don’t need to go to law school to understand what may be happening.
In 2018, my company launched the first major studio NFT with Fox Filmed Entertainment, Marvel Entertainment and Atom Tickets. The promotional NFT was distributed to thousands of fans who, at the time, had never heard of an NFT, nor words like blockchain, crypto, metamask, distributed ledgers, etc. In fact, we called the asset an “Authentic Digital Collectible”. The campaign was a success from a marketing and promotion perspective, yet only 57 of the assets actually left users wallets and made it to the public chain and traded on the early days of Opensea.io. A few buyers swooped in and the price of the assets increased rapidly… and then, crickets.
The NFT marketplace was young and only a handful of collectors engaged.
Then, in January of 2021, at 2am, my phone buzzed as the NFTs began to trade. The Asian market was up and running and the NFT madness was in full swing. For a day or two there was a small frenzy, and then silence. I didn’t know what to make of it at first, but…..
I watched the market evolve the next few months, and I saw a disturbing trend from NFT collectors to NFT speculators.
From Jan to March the NFT trading world was 30/10/2 .
- 30,000 buyers that dipped in once a month to learn or buy their first NFT
- 10,000 active crypto enthusiasts that were core NFT fans
- 2,000 NFT whales that set the market and drove the prices into the stratosphere (ie. Beeple)
The market dipped for a second and then, over the past 60 days, it’s gone crazy with the launch of “insider” NFTS — Meaning, NFTs not related to what the general population would consider famous brands. From Faticorns — https://www.faticorns.com) to Stoner Cats.
The model:
- Create 10,000 assets of an obscure or newly invented brand (Even a 12-year old can do it — https://futurism.com/the-byte/12-year-old-400000-selling-nfts-to-idiots)
- Push to market
- Pump the secondary exchange
10,000 is the magic number these days because of Crypto Punks all of which are “programmatically generated” through a randomized algorithm built from a set of premade art object.
So why are the major brands, “outsiders”, not selling like the “insider” brands? What’s driving these near weekly drops of 10,000 random assets and driving multi-million dollar returns?
Wash Trading? Money Laundering?
To be clear, I’m not pointing a finger at Bored Ape Yacht Club or Stoner Cats as wash trading schemes, i’m simply pointing out the trends that are driving many copy “cats” that nonfungiblbetokens.com discussed in their reporting mirror what is happening. A spike in wallets (so called users) trading assets back and forth.
Back to Deadpool 2 — why wouldn’t a brand of Marvel and Fox stature, first of it’s kind, etc. trade like these unknown “insider” brands? Is it that the crypto traders are think they are outsiders and only support their kind? Or is there something more sinister swimming at the bottom of the NFT iceberg.
I am a huge proponent of the non-fungible token model and believe internet 2.0 will be built on the current shoulders of the NFT pioneers. But, for now, Brands and IP, be careful who you pick and choose to work with and how you launch your IP before risking your core identity, value and reputation.
See my last post for more on this; https://gftexchange.medium.com/outsider-nfts-arent-working-yet-8902bb45552f?source=your_stories_page-------------------------------------
By Jonas Hudson, Co-Founder, The GFT™ Exchange.
About The GFT™ Exchange: The GFT™ Exchange enables IP partners, brands, distribution partners and marketplaces to mint, distribute and reconcile trusted, individually identifiable digital assets to customers. Through a private/public blockchain hybrid approach and an IP alliance (called the GFT™ Alliance), the GFT™ Exchange enables protection for IP owners and consumers when it comes to provenance, asset security, and secure financial reconciliations.
