To date, the cryptocurrency sector has not undergone proper regulation, which exposes investors the threat of market manipulation. One of the ways in which exchanges allow large investors to manipulate the price is the so-called “wash trading”.
BTC and wash trading – over half of all BTC trades are fake
According to the latest analysis, more than half of the total number of BTC trades on exchanges are fake. This process is called “wash trading”. It basically is false trading volume on individual exchanges.
Forbes was the first to explore this phenomenon. In total, the survey covered up to 157 cryptocurrency exchanges. The conclusion of the analysis showed unflattering results. Up to 51% of daily trading activity with BTC is fake, it’s essentially fictitious trades. These facts are very easy to verify. Forbes reports that daily BTC trading volume was $128 billion in June. However, this is up to 51% less than was actually reported by individual exchanges. In reality, it is up to 262 billion dollars. How is that possible, you ask?
“Entering or pretending to enter transactions in order to create the impression that purchases and sales have taken place without the trader taking market risk or changing his market position. This is called wash trading,” according to the US Commodity Futures Trading Commission.
Large exchanges dominate
The number of fake transactions is, logically, most evident on the largest cryptocurrency exchanges, such as Binance or Bybit. The disadvantage is weak regulatory oversight, which could prevent this phenomenon.
Bitwise published even more negative results in March 2019. According to the results at the time, up to 95% of BTC trading volume was fake. This unflattering result casts a bad light on the cryptocurrency sector. Similar research indicates that the majority of traders or investors have nothing to do with the movement of the price of BTC.