The dirty business of wash trading and how it gives crypto a tarnished name

As a crypto trader my favourite place to look for daily coin or token stats is CounMarketCap. Here we can see all 2000 or more coins listed in order of volume traded. Most of the coins are traded across the globe on numerous diverse cryptocurrency exchanges. And they are listed in order of daily volume traded with Bitcoin obviously number one by a long shot. All the exchanges are also listed there in order of popularity or should I say, trade volume. Many traders rely on this website for valid stats upon which to base their trades, but what if it turns out that most of the stats and figures are fake?

According to the data research company Blockchain Transparency Institute (BTI)

The majority of the top 25 BTC trading pairs listed on CMC (coin market cap) are grossly inflated false volumes. And it’s not CMC that’s to blame here. It’s the exchanges. Take a look at the document released earlier this month here if you want to know the details. BTI used top consultants from the industry as well as algorithms over a period of three months to come up with clear evidence that most exchanges are conning us.

That excludes Binance, Bitfinex and Liquid, which is a great consolation since those are where many of us trade. But the rest of them are not just nudging the pool table slightly, so to speak, but are hugely inflating the volume on certain BTC pairs to such a shocking degree that basically only 1% of the volume recorded is legit and the other 99% is wash trading. It couldn’t get much worse.

Not only does this tarnish the reputation of those exchanges but it also corrupts the reputation of cryptocurrency as a whole. And crypto is already hard enough to explain to the uninformed mainstream market. We have already been branded with the mark of the beast by the world’s top economists like Jamie Daimon or Warren Buffet, and now this revelation comes along to chase away the last possible potential retailers who could enter the market with their much needed liquidity.

Besides that

It scares off traders who can no longer trust even their own insider community in this already elite or exclusive minority on the planet who actually do accept crypto, and perhaps even love it for the benefit and liberating effect it can bring. I mean here we were celebrating the fact that blockchain technology had arrived to decentralise the economy, remove the charlatan banking industry from the equation, and now it seems our own trading platforms are just as rotten too. Who can you trust in this trustless society if not the smart contracts written on the blockchain? At least some of the platforms are still legit.

What it also implies

Is that much less trading is actually going on than is being reported, particularly in this extended bear market where many, if not most, traders have either been squeezed dry of liquidity by the market crash or have been totally chased away due to the lack of profits. Weak hands end up selling out by this stage in the market cycle and we “hodlers” left behind are few and far between. Exchanges still want to make money of course, so they simply fake the volume in the hope of attracting unsuspecting traders onto their exchanges, hoping to make some commission off their trades.

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This business of wash trading is a dirty business. There is nothing good and clean and fresh about it. It’s when a trader or his bot buys and sells an asset repeatedly back and forth, to themselves essentially, giving the appearance of inflated volume and totally fake interest in the token. Perhaps not total, only 99% fake. If that’s any consolation.

What is a consolation is that at least I can still go to Binance, Bitfinex or Liquid to do honest trading. The rest of the top traded pairs on other exchanges will remain questionable. Even OKex has apparently used wash trading in just about all of its top 30 traded tokens. This is really not OK. At least it’s coming out into the open now for us traders to see for real. You can check the full exchange advisory list here if you like to get an honest picture. Or check out their website blockchaintransparency.org

Full list

It seems these exchanges

Have also succumbed to greed and fear in their noble attempt to facilitate our blockchain revolutioin and adoption of crypto globally. Well they always said power corrupts. And money is power, isn’t it? Just for the sake of some inflated listing fee, they have stooped this low to attract new tokens onto their site. It seems a sad day for the revolution when traitors such as these have infiltrated the ranks. Fortunately their names are publically listed for you to inspect. Named and shamed, let’s hope they mend their ways or go back to mainstream fiat markets where corruption of this sort is completely expected.

Exchange Advisory List — Blockchain Transparency Institute

And I thought Huobi and Bithumb were cool once. At least the wash trading is not on all their listed coins, it’s primarily found with Monero, Dash, Bitcoin Gold and ZCash, with no tarnish to those coins themselves. This is about the exchanges, remember. They are the ones doing the wash trading to inflate volumes. Well if only 1% of the actual daily volume mentioned is real, it sure means that the crypto winter is deeper and darker than we imagined. Where have all the traders gone? Probably hibernating until the bull run starts up again.

It seems the only traders left are bots running the show. AI truly has taken over. In this modern era they do the trades, watch the trades, write journalistic articles about trades and probably even post replies to their posts too. It’s enough to make you appreciate the humans you do come across on any platform so much more.

With this news coming to light

It is only going to provoke the US regulators even more in their quest to systematize and regulate the crap out of crypto, lest all this manipulation has a negative impact on those BTC futures. Let this be a lesson to all of us. With the open distributed ledger of blockchain, you can’t hide anything for long, so better we play fair and openly in our crypto industry. No wash trading and spoofing please.

You know who you are and you have been warned.