50% of All Bitcoins Are Subjected to Wash Trading, Report Suggests

Wash trading has always been a serious pressure point for the cryptocurrency markets, which might be slightly expected in such an unregulated market. However, the situation appears to be getting better, according to a recent report. Since the beginning of the year, the percentage of wash trading among the top exchanges has dropped drastically by almost 36%, while Bitcoin’s wash trading volume stands at around 50%.

This article was first published on December 16, 2019.

What is Wash Trading?

A single coin can be bought and sold with the sole purpose of providing false and misleading information to the market. This process is referred to as wash trading. One entity can serve as both the buyer and the seller of a specific coin (or any asset), pumping the volume and motivating other traders to follow the price movement. However, there’s the possibility of a trader colluding with a broker and executing the buys and sells as well.

This form of market manipulation is illegal in numerous countries, including the U.S. The report shows the U.S. and Japan as the two countries with the cleanest exchanges, as both countries have stringent regulations barring such practices.

Cryptocurrencies Affected by Wash Trading

Bitcoin’s wash trading volume is around 50%, and it’s the lowest among the top 5 cryptocurrencies. Bitcoin Cash has the highest percentage, 82%. Ethereum and Litecoin follow at 75% and 74%, and XRP comes in at 55%.

The numbers show that the most heavily impacted tokens in the top 25 are Ethereum Classic, Dash, and Monero, with over 80% of their volumes being wash traded.

As far as stablecoins go, USDT remains the most widely used one for wash trading. Its real trading volume is 94%, even after we exclude 67% of wash trading. USDC has the lowest wash trading volume of 7%, and its actual volume puts it in second place. DAI has a wash trading volume of 30%, PAX is next with 13.7%, and TUSD follows with a bit under 12%.

Exchanges and Wash Trading

The most heavily-impacted cryptocurrency exchanges are Bibox and OKEx. Their wash trading comprises more than 75% of all trades. Even after we exclude their wash trading volume, however, they are still among the top 20 exchanges by trading volume.

The cleanest exchanges, on the other hand, are Kraken, Coinbase, Upbit, and Poloniex.

Less than 10% of both Gemini and Binance’s volumes are reportedly wash traded. A previous report showed that Binance’s BTC/USDT market had a real volume of 100%.

In any case, wash trading remains a serious challenge for the space. In fact, it’s one of the main issues that will have to be addressed in order for the US Securities and Exchange Commission (SEC) to approve a Bitcoin ETF.

UPDATE: OKEx Response

In response to the cliaims, OKEx wanted to clarify and told CryptoPotato:

“OKEx is not involved in and does not tolerate any wash trading activities on our
exchange […] and is committed to providing a credible and trustworthy platform for everyone to access and trade digital assets… We have adopted different measures to prevent and stop any attempts of wash trading. We have a trading surveillance team working 24/7 to monitor the trades on OKEx.”