Wash trading

Wash trading is when someone buys and sells the same asset with themselves (or coordinated accounts) to fake trading volume and activity. It matters because inflated volume numbers can trick you into thinking a token or NFT collection is more popular or liquid than it really is, pushing you to buy in at a bad price. A well-known example: in 2019 the Bitwise Asset Management report found that 95% of reported Bitcoin trading volume on unregulated exchanges was likely fake or non-economic, largely from wash trading meant to attract listing fees and rank higher on data sites like CoinMarketCap. Some NFT traders also wash trade to farm airdrop rewards or inflate floor prices before selling to real buyers.