The National Bureau of Economic Research (NBER) recently published a working paper titled “Crypto Wash Trading.” The paper studied 29 unregulated exchanges and concluded that, on average, more than 70% of the volume on the platforms is wash trades, using statistical and behavioural patterns to determine which transactions were legitimate or not.
The researchers discovered that wash trading volume on some exchanges can account for up to 80% of total trading volume. Wash trades accounted for nearly 80% of total trade volume in twelve “tier-2 exchanges,” according to the researchers. “These estimates translate into wash trading of over 4.5 trillion USD in spot markets and over 1.5 trillion USD in derivatives markets in the first quarter of 2020 alone,” the researchers wrote.
Wash trading has short-term incentives, according to the researchers. According to the study, fake transactions frequently affect the rankings of exchanges on data and statistics websites such as CoinMarketCap. Furthermore, fake transactions have a short-term impact on cryptocurrency prices on exchanges.
(Reporting by Shikha Singh, Editing by Kapil Rajyaguru)
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