Manipulated trading data
Two-thirds of all crypto transactions were fake
A large-scale study shows that the buyer and seller were identical in many trade transactions that were carried out automatically. Another blow to the ailing crypto industry.
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The crypto industry, in the picture the cryptocurrency Bitcoin, has been going through a serious crisis for months and is repeatedly confronted with allegations of fraud.
Jean Claude RaemyEditor Economics
The crypto industry is currently going through such a crisis that the term “crypto winter” has already established itself. What is meant by this is that after the bright years of the upswing, a gloomy, depressed atmosphere now prevails around the topic of crypto.
The latest report is still a shovel on it. According to the “Sonntagszeitung”, researchers from the USA, Great Britain and China presented sobering results in a work published by the American National Bureau of Economic Research (NBER). Accordingly, 70 percent of all transactions on a total of 26 unregulated crypto exchanges were just fake.
Buyer and seller identical
Specifically, these transactions were wash trades. These are mostly bot-generated trading processes that don’t even exist, or more precisely: where the buyer and seller are the same actor. The purpose of this process is to artificially generate interest in a cryptocurrency through exchange-based trading. If there is a lot of trading, price increases are to be expected.
The phenomenon is not even new. Last year, the business magazine Forbes analyzed 150 crypto exchanges worldwide and came to the conclusion that over 50 percent of stock exchange transactions are wash trades. As a result of the crypto boom, however, the problem has so far been swept under the carpet.
This is fraud. This primarily takes place on unsupervised crypto exchanges. Three stock exchanges supervised by financial authorities examined by the research team did not show any such manipulations. However, only a small proportion of all transactions go through regulated exchanges such as Coinbase or Bitstamp. Thus, a significant portion of the reported crypto trading volume is likely to be fake.
Negative reports don’t stop
The NBER report joins an ever-growing list of negative crypto reports. The collapse of the crypto exchange FTX and the lawsuit against its founder Sam Bankman-Fried drew possible fraud in the crypto world to the public for the first time. Meanwhile, the prominent Winklevoss twins have also been sued for fraud with their crypto exchange Gemini. And on Wednesday, crypto exchange Coinbase accepted a $50 million fine for failing to take anti-money laundering measures.