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Wash Trading in Unregulated Cryptocurrency Exchanges: New Study Finds 70% of Transactions Are Fake

A new study published by the National Bureau of Economic Research (NBER) suggests that most transactions in unregulated cryptocurrency exchanges are fake.

Wash Trading
Wash Trading

In the working paper titled "Crypto Wash Trading," the researchers analyzed 29 unregulated exchanges. They found that, on average, more than 70% of the volume within these platforms is comprised of wash trades. In some exchanges, this figure rises to as high as 80%.

The researchers also found that wash trading, which involves the simultaneous buying and selling of security to create the appearance of higher trading volume and activity, has short-term incentives. It can impact the rankings of exchanges on data and statistics websites like CoinMarketCap and affect the prices of cryptocurrencies within the exchanges in the short term.

FTX Debacle Continues as Wallets Linked to Alameda Research Show Asset Movements

The ongoing controversy surrounding cryptocurrency exchange FTX has garnered further attention as wallets linked to Alameda Research have been observed moving around $1.7 million in assets through crypto mixers. These movements were noted shortly after former FTX CEO Sam Bankman-Fried was released on a $250 million bond.

The collapse of FTX has led to a loss of trust in centralized exchanges (CEXs), and executives at CEXs have been vocal about their efforts to win back user trust. In a recent interview with Cointelegraph, several leaders within the crypto exchange industry expressed their confidence that the industry will recover post-FTX.