Is NFT Market Dead? What Does Lado Okhotnikov Think About It?
The NFT opens up new opportunities for artists, developers, and investors. For some, this is a way to earn money, for others it is an opportunity to collect digital items. However, when buying such tokens, there is a risk of running into a “fake”. Artificially inflated sales volumes confuse even experienced traders, not to mention beginners. But in fact, there is nothing complicated here, we will tell you what is the benefit of owning an NFT and how you can make money on it.
Manipulations - You Need to Put Up With It
Statistics say almost half of all NFT sales are fabricated. These transactions are predominantly associated with a practice known as "fraud trading" or wash trading.
In the course of manipulations, sales volumes are artificially increased. Sometimes the numbers are dozens of times higher than the real volume of legitimate transactions, which is why inexperienced investors invest in a fake asset.
Half of the created NFTs are fake.
Fraud is the conspiracy of individuals or groups of people to create multiple transactions. This creates the illusion of high demand and activity for a particular NFT. Such a tactic is used to attract other investors and collectors and make them think that the token is more valuable than it actually is.
Fraud is related to several factors. First, increased volume draws more attention to NFTs and attracts potential buyers. For an unprepared person, this, of course, immediately causes a feeling of a “lost profit” (FOMO), which makes it necessary to make an impulsive purchase.
Secondly, the allegedly increased demand forces them to sell their own assets to fraudsters at a lower price.
Scheme Is Gaining Momentum
The NFT market is growing rapidly and it is sometimes impossible to keep up with the emergence of new manipulations. For example, the well-known platform Blur, without realizing it, stimulated the growth of fraudulent activities through its trading reward system.
This raises many questions. What led to the surge in transaction volume on the platform?
Skeptics argue that greed played a significant role in this process. According to CryptoSlam, in recent months, the turnover of non-fungible tokens has exceeded $600,000,000. And most of the transactions were “inorganic”.
A well-known trader in the crypto world, Hildobby, using Dune Analytics, claims that the majority of trading volumes in Blur were created thanks to structured rewards.
Today, the volume of trading involving non-fungible tokens exceeds $65 billion.
Half of this volume is occupied by tokens with fake interest and a third by scam projects. This makes us think about transparency and fairness in the NFT market. It is not yet known whether this requires additional measures to combat fraud.
Harm from NFT
In many jurisdictions, NFT trading is done using fraudulent schemes. This is a form of manipulation and harms investors by threatening financial institutions.
Considering that the cryptocurrency is still in its infancy and regulators are still versed in all aspects of this industry, scammers are taking advantage of the moment.
Many perpetrators hide in DeFi where nothing can be controlled. This is a kind of “safety island”, where everyone is protected.
More recently, the issue has even reached the President of the United States - Joe Biden put forward a demand to close the loopholes that violators use to trade cryptocurrencies.
Experts unanimously declare that trading using fraud is still ongoing, but nothing can be done about it yet.
NFT Fraud and Money Laundering
One such analyst whose notes refer to the NFT issue is Lado Оkhotnikov. Lado is the CEO and founder of Meta Force and spends most of his time in crypto.
The data he found was startling. His publication contained information that the lion's share of the entire NFT turnover is the result of fraudulent trading. And this figure averaged about 60% during the entire previous year.
Lado Оkhotnikov used four specific methods to detect fraudulent trading.
First, the addresses were sorted, which related to buyers and sellers of a particular NFT. Secondly, the algorithm revealed reverse transactions between wallets.
As soon as someone purchased the same NFT several times, he was labeled as a potential fraudster.
There were also addresses that bypassed the above methods. But through additional verification, it was still possible to identify the criminals.
After analyzing everything to the smallest detail, Lado said that almost half of the total volume of token trading took place on twenty major sites, among which Blur and Sudoswap are the largest.
Previously, analytics platform Chainalysis conducted its own research on NFT fraudulent trading. From their report it follows that about a hundred people received tens of millions of dollars in illegal profits. And this data is only for 2022.
Representatives of the company say that law enforcement agencies are showing interest in investigating fraudulent NFT trading, but so far they have not provided any details.
Chainalysis has been monitoring the movement of illegal funds through crypto for a long time. Their tools allowed us to identify an increase in transactions from suspicious addresses at the end of 2021, and an ongoing flow in the third and fourth quarters of last year.
How Not to Lose Money
Lado's research suggests that most of the counterfeiting is also associated with the LooksRare and X2Y2 sites where, according to his data, more than half of the sold NFTs is the work of scammers.
Top exchanges with fake NFTs
Childebert Mulier agrees with it. In late 2022, he gained public attention with his data analysis revealing NFT fraudulent trading practices.
Mulier is a Research Fellow at Dragonfly Investment Company. At one time, he developed a data analysis tool that revealed details about the illegal trade in non-fungible tokens.
According to the expert, 94.7% of the volume of fictitious transactions falls on LooksRare and 85% on the X2Y2 platform. These are catastrophic figures, given that tens of billions of dollars have passed through these two sites.
In response to this, Lado noted that not all platforms where digital assets are sold are a tool for fraudsters,
"The OpenSea platform is still the largest platform, accounting for only 3% of fictitious NFT turnover. And that's a very good indicator."
Over the past year, more than 20 thousand tokens were discovered in LooksRare, which were probably the result of manipulation, and on the X2Y2 platform - 11 thousand.
There are just over 4,000 NFTs on the OpenSea platform that could be linked to fraudulent transactions, while 2,285 such cases have been identified on the Blur platform over the past few months.
Why the Platform Cannot be Punished for the Fictious Sale of Tokens
Lado says that it is very easy to create a fictitious demand: it is enough to “run” the token through a group of interested persons several times, and the activity takes the form of organic trading.
Firstly, the platforms themselves stimulate the sale of NFTs with additional rewards. And if everything went right, traders instantly profit from this by selling reward tokens to compensate for the fees.
Risk statistics in relation to different blockchains.
The second reason is more hidden: a trader can independently increase the low volume of trading on low-liquid tokens so that other traders pay attention to this.
However, Lado is still of the opinion that organic traffic cannot be imitated for a long time,
“There is a risk that due to dubious manipulations, the token will still lose its attractiveness with the target audience.”
Zhong Yang Chan, co-leader of CoinGecko, also agrees and says that the so-called tax loss is an important reason for fraudulent trading.
In his speech, he noted that the increase in trading volumes fraudulently undermined confidence in the NFT market. This led to a "bubble" effect two years ago, and has still not allowed projects to recover their reputation.
Lado Okhotnikov About NFT Royalty by Meta Force
- We have relied on status NFTs that link different programs within the Meta Force. One might ask what is the high status of the token?
- The most important is the program that offers to get the product and then sell it. The main focus is on successful sales with the help of the best tools, involving the entire community.
- Members may sell products above their current level. For successful sales, Energy tokens are awarded, which play an important role in NFT pumping.
- The main source of income is based on the turnover of sales and the receipt of Energy tokens, which are used for pumping.
- The campaign will offer unique and sought-after tools with constant demand. This is what will contribute to the increase in turnover and stable interest from consumers.
- I consider it necessary to note that all participants have equal opportunities, and there is no need to rush to activate the levels, since the program is designed for long-term work. NFTs received at the beginning will have a minimum energy level, which will increase with Energy tokens received through participation in various programs.
- I already talked about everything in more detail in my interview - All You Need to Know About Royalty NFT Before You Join It. I advise you to watch.
How to Protect Yourself from Scammers - How to Recognize Manipulation?
A sharp surge in trading volume is always alarming for experienced traders. Price changes in a large range over a short period largely indicate manipulative actions.
Use reliable trading platforms that verify sellers. Avoid marketplaces where an anonymous or unverified user can easily list their NFT for sale.
Significant discounts can also be a sign of fraud, so if in doubt, seek out a financial advisor or contact traders as a last resort.
Otherwise, you need to follow the industry as a whole and analyze what is happening with NFTs in one category or another.