After the crypto sector comes the bottom of the overall trade sector in 2022, investors step into 2023 with hopes to see an improvement to the market sentiment.
What is Wash Trading of Crypto Assets?
When a group of traders or bots purposely engage in the buying and selling of the same crypto asset to inflate its price, that process is call as wash trading.
This way, a broker and a trader often come together to mint profits after injecting orchestrate misinformation into the market.
The prices of the crypto asset could remain risen by the time the wash traders are working with them, but soon after they halt their activities, the price of the asset may drop down, exposing other unsuspecting investors to financial risks.
Not just in the crypto sector, wash trading also poses dangers to the investors of other assets like stocks.
The US has made wash trading an illegal and punishable offense.
Wash traders exploit centralise exchanges to perform their actions.
Some of the popular centralise exchanges include Binance, Coinbase, Kraken, and KuCoin among many others.
In March 2021, Coinbase agreed to deposit $6.5 million (approx. Rs. 53 crore) to settle claim that its former employee was wash-trading Bitcoin and Litecoin.
The claim was levied by the Commodity Futures Trading Commission (CFTC), which also reportedly alleged that Coinbase was reporting inaccurate information around trading on its platform.
In 2022, a Forbes report analyse the trading activities on 157 centralise exchanges and found that over 50% of all Bitcoin trade volumes that crop up, were fake.
