Bitcoin Forum

In the past, there have been concerns about money laundering taking place in the crypto community but there seems to be a new kind of scam happening in what is known as "Wash Trading".
Where the exploiters/investors are buying and selling the same tokens in order to create an imaginary volume or improve the reputation of the platform or exaggerate the values of trading.


According to this report[1], most of Okex’s volume was fake "only 11% was deemed as a real", coinbene was the worst "1% real".



[1] https://www.blockchaintransparency.org/

HACKEN (https://coinmarketcap.com/currencies/hacken/)  is talking about that for some time.
Interesting Post about your topic: https://blog.hacken.io/fake-volume-investigations-summary

Also, Binance`s Non-profit organization is an interesting thing...

It's most unfortunate to note that Wash Trading is not new at all, it was first banned in 1936! See https://en.wikipedia.org/wiki/Wash_trade

If a rogue trader couples leveraged trading with Wash Trading I suspect you don't need much to manipulate a market.

Regulated exchanges would force all players to adhere to these rules, which makes a better environment for all of us.

Having invested in to some altcoins that are on these exchanges I wish that they'd delist their token, similarly I wish that coinmarketcap and other such sites would stop listing them and recognizing their prices. It only further promotes them and allows more people to fall in to the trap of thinking it is legitimate.

Believe it or not but CoinMarketCap mostly lists the supposed "good" players in the market. There are lots more bad players out there.

Obviously there's no way of knowing, but it's rather more important to know who's wash trading. If it's the actual customers then I'm not too bothered. That's what enough assholes do already.

If it's purely the exchanges themselves, and I'll guess most of the time it is, then that's much more odious.

It's been going on for a long time. Huobi was the first to use this kind of volume churning on a major level. If you load their chart on Bitcoinwisdom, you can see when it began in Q3 of 2015. OKcoin started the same shortly after, then it spread like wildfire to Chinese exchanges generally and the increasingly important futures exchanges (OKcoin and BitVC). In the 2017 bull run, Korean and Japanese exchanges were widely believed to have pumped their volume too. The practice is definitely used to varying degrees across many exchanges.

why is that? with volume pumping, i figure the exchanges are just trying to exaggerate volume and liquidity to attract more traders. some relatively innocuous algorithm that amplifies volumes without necessarily manipulating the market much (since everything is amplified).

if traders are doing it, i assume their intention is always bad. rationally, there's no reason for traders to engage in that behavior unless they are trying to manipulate price.

If an exchange is willing to pump the shit out of their volumes then I'll also assume that they're willing to front run the shit out of their customers too. They're attracting customers by deception so I can't imagine the deception will stop there in many a case.

I naturally assume traders themselves are out to fuck as many people as possible and their wash trading is just a part of that.

It is most certainly the traders. Manipulating the price means they profit from the activity. Traders are in it for the profit, not for the altruistic win. It is within the interest of the exchanges to allow Wash Trading, or rather, not disallow or actively monitor for it since this activity is not yet prohibited via regulation. Exchanges are also in it to make a profit. If the traders engage in this behavior then not only do exchanges benefit from the fees derived from the aforementioned, but also the positive side effects from exaggerated volumes.

I think so too. It would actually shock me if exchanges didn't have their own 'market making' bots trade against their users with all the precious information from the main exchange itself.

BitMEX is doing the same thing aside from them stating that they don't trade against their users with insider information. I find it very hard to believe that they don't do so, but hey, evidence or it didn't happen....

I can't wait for most of the current exchanges to be replaced by exchanges respecting all the laws within the jurisdiction they operate in. That's progress this market needs.

This issue has been around since Mt. Gox days, and I don't think it will really be addressed too soon no matter how many committees they setup to combat just that. Wash trading really is a nuisance on the market but then again they are somewhat crucial into changing the tides of the market sentiment (not that I support the idea, though.) Even in futures market, ones that are under keen eyes from the government can be plagued by such activities, so I'm not that shocked to learn that crypto exchanges still suffer from such activities.

Having watched the price difference on the heavily manipulated volume markets and those which are legit I think it's clearly traders looking to exploit others. The price tends to fluctuate over a few day span from above to below the true market value by around 20-30%. If they can get anyone to fill trades at these prices then they can go and dump on the other exchanges or just wait and then move the price downwards by all of their wash trading. Something needs to be done about it but it's not easy to fix. The best option is removing all 0 fee trading platforms.

I guess we need more external regulation over the cryptocurrency exchange platforms.This type of scam just won't go away.Perhaps all new altcoins should be banned from listing on cryptocurrency trading platforms and the ICO token sales will have to pay a very high listing fee,in order to be listed.I don't know about any other solutions.KYC policies just won't work.

Same here, but wash trading won't ever be exterminated completely. It happens in every market. The difference is that crypto is such a kindergarten, that no one even cares to put effort into hiding how much wash trading activity there is here. In stock markets it's done by institutions using proxies, which makes it way harder for any regulator to figure out what's happening.

It's really the smart (stock) market versus the dumb (crypto) market. We're dealing with amateurs here. The professional guys have been doing this for decades and know how to conveniently make their trades look as organic as possible. If we can point at certain exchanges for being wash trading candidates, regulators won't have much of a problem with it either, especially if they pull out their big guns and actively start to raid these exchanges.

I have guessed since the first entry into the market in 2015, trading volume is unpredictable even when conducting market tests to make double orders there will be a trading robot that executes the market. Almost all centralized markets do that, even though there are some decentralized markets that do the same.

I don't think this is neither illegal or even immoral. When the whole livelihood of your lives work depends on you doing wash trading so your volume look high that is still quite acceptable, add the fact that others do it too and you got yourself a no brainer.

Of course from the stats it looks like coinbase is making it way too frequently and they need to chill out a bit but when your wash trading is only 30% or so of your whole trading volume it makes sense. I wish we lived in a world where wash trading was not a thing and than when someone did it we could really go all out on them but when 90% of the market is doing the same thing the ones who do not do it really just either have high volume enough to not care or they are lying about not doing it.

Well, I believe they might claim that but obviously they don't do the best of jobs at it. It's so clear with many exchanges that the volume isn't legit. I guess the issue is that CMC don't know if it's traders or the exchange behind it and they can't punish the exchange for the actions of some traders.

No, it's not acceptable because "everyone does it" and it's not the traders: it's a deliberate fraud by the exchanges, as the report makes clear

Are you trolling? Good one if you are, otherwise you are not making any sense. Here's why: it's fraud. Wash Trading is fraud. Anyone who has a livelihood dependent upon such activity is a fraud too.

There's a third possible explanation: some libertarians question the whole concept of fraud, arguing that every trade interaction (https://naturalrightslibertarian.com/2011/03/natural-rights-libertarianism-and-fraud/) is based in deception (see Friedman comment in link).

Incredible data  :o
I'm scared about these results even if we could consider like a base volume that can be unimportant once volume increases.

I understand the argument, but the existing society in which I currently function and presumably you too has declared that Wash Trading is illegal. They have a pretty good argument for it too.

Sure, it's not illegal just yet in the crypto space but it's on the way.

Exchange transactions do not happen on the blockchain. Therefore exchanges do not need to wash trade in order to pump volumes. They can simply inject fake transactions into the trade log. Internally they mark the fake ones so they don't get counted in their accounting. Externally you see it as a transaction.

Without external auditing of their systems and oversight, centralized exchanges are free to do whatever they want and if they really wanted to these fake volumes would be virtually undetectable or impossible to prove.

I knew that some exchanges try to make a fake data to increase their popularity, but I never knew that the conditions is so severe, almost all of the exchange do this kind of things to attract more investors, its a fraud and manipulation, if the exchange do this thing with the intention to attract more investors then we need to question the legitimacy of the exchange, it could be one of the way to attract more customers and then runaway with the money

I don't think it's acceptable at all. It's a type of fraud as people are basing their trading decisions around the volume on these exchanges.

If this is true, I think this is very terrible and a big disaster. I will not eat all the news brutally, this news should be checked for truth.
many people trade there, I'm sure they will be confused and feel insecure.

Unless I missed the point, the argument was that if someone took advantage of another person's financial struggles to exert a bargain then that could be taken back because it's fraud. But that is completely separate to fraud. That is knowing of another's situation and using it to your advantage, it is not manipulating a situation so as to make it seem different so that another person is mistaken and you can profit from this.

Your analysis of price manipulation in the market makes traders on the exchange understand how they pump and hold prices in the set period
and they laundered prices in exchange.

It's without a doubt true, the only thing which cannot be for absolute certain is the extent of the wash trading and who is behind it. If you know people who trade on these exchanges I would advise you that they stop, their offers will only ever be filled when the price is too high to buy or too low to sell.