According to Dune Analytics, shady trades accounted for more than half of all NFT transactions in 2022 and nearly 45% of all-time NFT trading volume.

Wash trading, a form of market manipulation in which buyers and sellers are identical or collude, continues to plague the non-fungible token (NFT) market. But a recent report compiled on blockchain data site Dune Analytics reveals just how serious the problem has become.

According to an analysis by anonymous researcher hildobby on December 16, wash trading accounted for more than half (58%) of the total NFT trading volume on Ethereum in 2022. The strategy peaked in January, with wash trading accounting for more than 80% of the total trading volume. Total NFT trading volume for that month.

The researchers used four filters to weed out odd trading behaviors that were most likely to point to wash trading. First, they filtered out obvious NFT transactions between the same wallet address. Second, they looked at back-and-forth trading of the same NFT between two different wallet addresses — one of the most common wash trading strategies. Third, if a wallet address purchased the same NFT three or more times, it was less likely to be flagged as a wash trade. Finally, if the buyer and seller wallets in an NFT transaction were originally funded by the same wallet, it was clear that there was a connection between them and was therefore flagged as a wash trade.

To get a sense of how common this practice has become since the advent of the NFT market, over $30 billion of all-time NFT volume can be attributed to wash trading when all filters are applied. This number is staggering, even though it only accounts for about 1.5% of all transactions that have occurred on Ethereum. If this seems confusing, don’t worry: it shows that most transactions are legitimate, but occur at prices generally lower than wash trading, which makes sense when the purpose of many wash trades is to artificially inflate the price of an NFT collection.

“Almost half of those outrageous ‘total volume’ figures we often hear are simply people gaming the system, not legitimate transactions,” hildobby wrote.

According to the data, NFT marketplaces LooksRare and X2Y2, both of which offer token rewards for participation on their platforms, have the highest percentage of wash trading, accounting for 98% and 87% of their total trading volume respectively.

Hildobby attributes the increase in wash trading activity to increased competition among NFT marketplaces for market share in trading volume.

“Well-intentioned programs to incentivize usage quickly emerged as a way to get ahead in the race to attract this volume and become the most successful market,” the authors wrote. “As a result, many widely cited statistics are misleading at best, painting a picture of organic usage that does not fully match reality.”

Wash trading is illegal under U.S. law and remains difficult to track in the crypto space. In February, blockchain research firm Chainalysis reported that while most NFT wash traders were previously unprofitable due to high gas fees, 110 profitable wash traders were still able to make $8.4 million in profits.