Market monitoring company Solidus Labs said in the second part of the "2023 Cryptocurrency Market Manipulation Report" released on Tuesday (12th) that since September 2020, the number of transactions on decentralized exchanges based on Ethereum has increased. Liquidity providers have conducted wash trading on at least $2 billion worth of cryptocurrencies, manipulating the prices and trading volumes of more than 20,000 tokens.
The report also noted that in a survey of a sample of nearly 30,000 decentralized exchange liquidity pools, it was found that 67% had executed wash trades, with wash trades accounting for 13% of the total trading volume of these pools.
Major Update! Unveiling Part Two of our Crypto Market Manipulation Report! Our data shows a shocking $2 billion#washtradeson DEXs since Sept 2020. That's affecting over 20,000 tokens! Full details here in our report: https://t.co/pcRvMBGfb0
— Solidus Labs (@Solidus_Labs) September 12, 2023
Wash trading is a form of market manipulation in which one entity buys and sells the same asset, creating the illusion of market activity. Wash trading also exists in traditional finance, however, Solidus Labs believes that when it comes to cryptocurrencies, market manipulators often have easier means to execute wash trades.
Solidus Labs wrote:
“In the cryptocurrency space, liquidity is dispersed across various centralized and decentralized exchanges, resulting in smaller markets that are more susceptible to manipulation.”
Regulation of Crypto Wash Trading
Who is responsible for the detection and prevention of on-chain wash trades is also an ongoing regulatory issue – likely given the borderless nature of decentralized finance (DeFi).
Solidus founder and CEO Asaf Meir said in a statement:
“Market manipulation remains a significant challenge for the cryptocurrency industry, especially in an era of increasing regulatory scrutiny and institutional adoption.”
Solidus believes that for cryptocurrencies and DeFi to thrive, this type of market manipulation must be prevented. The company explained that wash traders come from different backgrounds and motivations, such as token deployers looking for an easy rug pull, speculators trying to participate in upcoming token airdrops, and reporting transactions Exchanges and market operators increase their trading volume to attract investors and users.
According to previous reports by Zombit, the National Bureau of Economic Research (NBER) stated in a research paper published in December last year that among the 29 unregulated exchanges it studied, on average, more than 70% of the trading volume was wash trading. .
According to researchers, there are short-term economic incentives for wash trading on exchanges, and studies have shown that fake trades often affect exchanges’ rankings on crypto data sites such as CoinMarketCap. Additionally, fake trades can also affect cryptocurrency prices on exchanges in the short term, while exchanges with longer histories and larger user bases have fewer wash trades.
This article Institutional report: More than $2 billion was involved in wash trades on decentralized exchanges, and the prices of more than 20,000 tokens were manipulated. First appeared on Zombit.
