Study Finds 70% Of Unregulated Crypto Exchanges Engage In Wash Trading

• A new research paper by the National Bureau of Economic Research (NBER) suggests that 70% of unregulated exchange transactions are wash trading.
• The paper studied 29 unregulated exchanges and found that in some exchanges, the wash trading volume can go as high as 80%.
• This translates to over 4.5 trillion USD in spot markets and over 1.5 Trillion USD in derivatives markets in the first quarter of 2020 alone.

A new study has revealed that approximately 70% of unregulated exchange transactions are wash trading. Published by the National Bureau of Economic Research (NBER), the paper titled “Crypto Wash Trading” was conducted to determine which transactions were legitimate or not.

The study involved 29 unregulated exchanges and used statistical and behavioral patterns to identify the wash trading transactions. The results showed that the average wash trading volume across all exchanges was at 70%, with some exchanges reaching as high as 80%. This means that more than 4.5 trillion USD in spot markets and over 1.5 Trillion USD in derivatives markets were subject to wash trading in the first quarter of 2020.

The researchers noted that wash trading is often done by market makers who are looking to increase liquidity in the market, as well as by traders looking to manipulate prices. They also found that the practice is most prevalent in decentralized exchanges (DEXs) and less so in centralized exchanges.

The paper’s authors conclude that while wash trading is often seen as a means of market manipulation, it can also be used by market makers to increase liquidity and by traders looking to take advantage of price discrepancies. They suggest that further research is needed to understand the true impact of wash trading on the cryptocurrency market.

In light of the findings, it is important for investors to be aware of wash trading and the potential effects it can have on the market. It is also important for exchanges to take steps to prevent wash trading and ensure that the trading environment is safe and secure for all participants.