Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Crypto Wash Trading

arxiv.org

Post reply on HN
Print view View original

21–30 of 306 posts

Re: Crypto Wash Trading

#21

Post by aeternum »

omellet wrote: post #12
rossdavidh wrote: post #2

Can somebody explain to a crypto-naif what "wash trading" means here?

It's a way to fraudulently pump the price (or lower the price) of a security. One person with two accounts can keep trading back and forth with themselves, and since crypto exchange know-your-customer measures are trivial or nonexistent, it's very easy to get away with.

There is still an order book so to get the price to rise or fall, the trader would have to buy or sell enough to clear the book.

How does trading back and forth with themselves do anything other than generate fees for the exchange?

Re: Crypto Wash Trading

#23

Post by ryanlol »

biddit wrote: post #17

So this implies that the crypto markets are actually far less liquid than the trade volume implies. Suddenly those massive 10% +/- fluctuations in a day make a lot more sense.

Yeah, but everyone already knew that unregulated exchanges are faking their volumes. This isn’t news to anyone who has the slightest clue about cryptocurrency markets.

This is one of the few things about cryptocurrency markets that isn’t being disputed by anyone.

Re: Crypto Wash Trading

#24

Post by Zamicol »

This is why Uniswap's data is much more valuable than centralized exchanges. On-chain trading permits a degree of transparency and trustworthiness not readily feasible with centralized exchanges.

Centralized exchanges are incentivized to doctor their data and lie about their volumes. The larger the volumes an exchange publishes, even if fake or gamed, the more relevant an exchange appears. Users must blindly trust whatever data exchanges can manufacture.

Uniswap charges a flat fee to every trade for all user. It's objective. There's no special back room trading rates, there's no ability to lie about volumes, there's no bonus for having high frequency bots trading. If you want objective data, Uniswap (and other on-chain exchanges) are truthful.

Re: Crypto Wash Trading

#25

Post by flerovium »

AutumnCurtain wrote: post #13
rossdavidh wrote: post #2

Can somebody explain to a crypto-naif what "wash trading" means here?

A "wash trade" is a trade which generates no value because it represents a swap in kind. For example, if I sell a broad market ETF like VTI and buy a nearly identical asset at the same price from a different firm, that could be a "wash trade" for tax purposes (simplifying this, but this is basically the gist). In the context of crypto transactions, it's typically referring to trades which are just shifting the same a…

This is not what the paper means. They mean a trade between two colluding parties to give the appearance of a trade.

Re: Crypto Wash Trading

#26

Post by whatshisface »

aeternum wrote: post #21
omellet wrote: post #12

Earlier quoted context omitted.

It's a way to fraudulently pump the price (or lower the price) of a security. One person with two accounts can keep trading back and forth with themselves, and since crypto exchange know-your-customer measures are trivial or nonexistent, it's very easy to get away with.

There is still an order book so to get the price to rise or fall, the trader would have to buy or sell enough to clear the book. How does trading back and forth with themselves do anything other than generate fees for the exchange?

Well, the book can be tiny sometimes.

Re: Crypto Wash Trading

#27

Post by aeternum »

dragontamer wrote: post #14
rossdavidh wrote: post #2

Can somebody explain to a crypto-naif what "wash trading" means here?

When you trade a any security to yourself (or someone closely related to you) to give the illusion of the price going up. (EDIT: Well... it could be for any reason. But illusion of price going up is one such application of the strategy). Lets say you invent a new NFT. You sell the NFT to __yourself__ for $100. Then, you sell the NFT to yourself (again) for $200. Finally, you sell the NFT to yourself for $1000. Then y…

Yes this works with NFTs but does not work with fungible money because there are typically thousands of people willing to sell once the price goes from 100 to 200.

Re: Crypto Wash Trading

#28

Post by cdiddy2 »

capableweb wrote: post #19

I recently had to go through extensive KYC/AML email conversations and phone calls with bunch of exchanges like Coinbase and others. Got me interested how wash trading could happen, when they were so strict with me, and which exchanges were investigated. These seems to be the exchanges they investigated. Would be interesting to see a breakdown of percentage per exchange, as I still don't understand how wash trading c…

Ya I seriously doubt there is much wash trading at the Tier A exchanges you listed above.

Re: Crypto Wash Trading

#29

Post by arez »

capableweb wrote: post #19

I recently had to go through extensive KYC/AML email conversations and phone calls with bunch of exchanges like Coinbase and others. Got me interested how wash trading could happen, when they were so strict with me, and which exchanges were investigated. These seems to be the exchanges they investigated. Would be interesting to see a breakdown of percentage per exchange, as I still don't understand how wash trading c…

How about the exchanges do it themselves because there's no regulation and if they don't do it, the volumes would be way to low

Re: Crypto Wash Trading

#30

Post by brianwawok »

dragontamer wrote: post #14
rossdavidh wrote: post #2

Can somebody explain to a crypto-naif what "wash trading" means here?

When you trade a any security to yourself (or someone closely related to you) to give the illusion of the price going up. (EDIT: Well... it could be for any reason. But illusion of price going up is one such application of the strategy). Lets say you invent a new NFT. You sell the NFT to __yourself__ for $100. Then, you sell the NFT to yourself (again) for $200. Finally, you sell the NFT to yourself for $1000. Then y…

You do NOT need to change the prices for it to be a wash trade.

What you gave me a profitable and likely illegal example of a wash trade, but not a definition of wash trade.

A wash trade could be selling thing X for $100 and buying thing Y for $100 where X and Y are the same exact underlying thing. Just moving pointless trades back and forth inflates volumes, which makes people thing the market is moving.

See https://www.investopedia.com/terms/w/washtrading.asp for more

Post reply on HN