Recent research shows that a whopping 98% of trading volume on major exchanges could be wash trading.
The research was carried out by Blockchain Research Lab on 12 major crypto exchanges to determine the level of wash trading in the market. Some of the key metrics analysed were wallet sizes, web traffic, and trading volume.
Wash trading is a form of malpractice where the reported trading volume is inflated, thereby boosting the value of the asset.
Ideally, the trading volume should be reflected in the web traffic and wallet sizes. Blockchain Research used the three parameters as a benchmark for the research. It also grouped the exchanges into three categories based on their history of wash trading. The categories were
- Zero evidence – Bitfinex, Bitstamp, Bittrex, Kraken
- High evidence – OKEx, Huobi, and FCoin
For the research, Blockchain Research monitored data from the exchanges from July 23rd and November 10th. The data also focused on major assets such as Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Tether (USDT), and the US Dollar. The result suggests that 98% of the trading volume reported by the exchanges was fraudulent.
The BTC/USD trading pair produced $490 million in high wash trade when the actual trade was only $42 million.