Report Reveals Over 20,000 Crypto Tokens Manipulated in $2 Billion Wash Trading Scandal
Summary:
Over 20,000 crypto tokens have been manipulated through wash trading on decentralized exchanges in the last three years, according to a report by Solidus Labs. Wash trading, which creates a false impression of market activity, has accounted for around $2 billion worth of crypto transactions. The study highlights the challenges of market manipulation in the cryptocurrency industry and the need for prevention measures.
More than 20,000 cryptocurrency tokens have been subjected to manipulation through wash trading on decentralized exchanges (DEX) in the past three years, as revealed by market surveillance company Solidus Labs. In the second portion of Solidus' 2023 Crypto Market Manipulation Report, it was disclosed that nearly 70% of a sample of 30,000 Ethereum-based DEX liquidity pools had engaged in wash trades since September 2020, resulting in approximately $2 billion worth of crypto activity. Wash trading involves the purchase and sale of the same asset to create a false impression of market activity. Solidus argued that while wash trades exist in traditional finance, they are conducted more easily within the crypto realm due to fragmented liquidity across various centralized and decentralized exchanges. The responsibility for detecting and preventing on-chain wash trading remains a regulatory question, given the decentralized nature of the crypto industry. Solidus founder and CEO, Asaf Meir, asserted that preventing market manipulation is crucial for the growth of crypto and decentralized finance. The study also detailed various types of wash traders, including token deployers seeking to exploit vulnerabilities, speculators trying to manipulate token airdrops, and exchange operators artificially reporting higher trading volumes. In 2022, a National Bureau of Economic Research study discovered that over 70% of unregulated exchange volumes were attributed to wash trades. These fake transactions impact exchange rankings on data websites and can also temporarily affect crypto prices within exchanges.
Published At
9/13/2023 1:07:38 AM
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