Muh Bubble Du Jur
Make My Day
“NFT” is the word of the year for 2021, Collins Dictionary announced on Monday. That term, an acronym for non-fungible tokens, burst into popular consciousness in March when artist Beeple managed to sell one of his digital wares for a cool $69 million, the third-largest price ever commanded by a living artist.
Total NFT trading volume footed to $5.9 billion in the fiscal third quarter, the Financial Times notes today, citing data service NonFungible. That’s a six-fold jump from the three months through June. Yet despite that explosion in activity, the roster of those transacting in the digital designs remains relatively narrow, as the community of NFT buyers and sellers stands at fewer than one million users worldwide, NonFungible estimates.
A research analysis from Scientific Reports documents the extent to which a few large players dominate the still nascent market. The Oct. 22 paper, which studied the some six million NFT transactions spanning June 2017 to April 2021, found that the top 10% of traders accounted for 85% of transactions and traded 97% of NFT assets at least one time. What’s more, the top 10% of buyer and seller pairs performed the same number of total transactions as the other 90% of participants.
With oversight in this corner of the financial Wild West at a minimum, the temptation for certain insiders to capitalize on their advantageous position can be too much to resist. Back in September, the head of product at NFT platform OpenSea resigned after admitting that he improperly traded the digital keepsakes using insider information. The executive had accumulated several prominent NFTs before flipping them shortly after a general release to the public.
Then, too, that concentration of activity in a select few hands informs broader concerns regarding digital assets, as the crypto market has enjoyed a near five-fold increase in the past year to a $2.67 trillion aggregate market capitalization.
As Twitter user @zachxbt documented on Monday, screenshots of a marketing slide deck from crypto market maker Darkpool Ventures included some eye-catching service offerings. Namely, the firm asserted that it could “place, cancel and modify multiple orders each minute, giving the appearance of a thriving market.” That practice, typically called spoofing, is illegal on traditional stock exchanges. The slide deck also highlighted the firm’s ability to “increase the price and walk up support levels,” suggesting outright price manipulation. Last but not least, the deck boasted about Darkpool’s capability to “help increase the volume on your trading pairs to gain more visibility.” That practice of generating synthetic volume to generate interest in an asset, otherwise known as wash trading, is illegal in the United States under the Commodity Exchange Act of 1936.
In response to this unwanted attention, Darkpool contended via Twitter that those slides were 18 months old and that the crypto market maker had erased those claims from a subsequent deck. That’s despite the “old” marketing materials making numerous references to projects that began in the current calendar year. Asked by ADG for comment, Darkpool remained mum as of press time.