Can somebody explain to a crypto-naif what "wash trading" means here?
But wouldn't this be risky in that obviously you have to pay transaction fees etc?
Crypto Wash Trading
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Re: Crypto Wash Trading
#42We also did extensive analysis on this in 2018/2019 and presented it to the SEC: https://static.bitwiseinvestments.com/Research/Bitwise-Asset...
Good news: it's getting better. Bad news: still very high.
Re: Crypto Wash Trading
#43I 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…
> We quantify the wash trading on each unregulated exchange , which averaged over 70% of the reported volume. Coinbase isn’t one of the unregulated exchanges.
Too bad neither the title of this HN submission nor the title of the paper says "Crypto Wash Trading on unregulated exchanges", but I guess that wouldn't write as many headlines.
Re: Crypto Wash Trading
#44Title should be "70% of unregulated crypto exchanges..."
No, regulated at as well it seems, see https://news.ycombinator.com/item?id=29279380 Edit: sorry, misunderstood parent comment.
That's just the list of exchanges, wherein Coinbase is listed as a regulated exchange. Compare that with the text of the abstract:
> We quantify the wash trading on each unregulated exchange, which averaged over 70% of the reported volume.
See how the 70% figure applies strictly to the unregulated exchanges?
Re: Crypto Wash Trading
#45I'm not surprised at all Many actors (including core devs) in the Ethereum (and other crypto) ecosphere see front running (known as MEV) and the payment for protection thereof (known as flashbots) as a "feature" so it's no wonder that other "creative trading techniques" run rampant. It seems like the reason for every financial regulation in traditional banking is rediscovered in the crypto space just much faster.
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Re: Crypto Wash Trading
#46This 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 wh…
~80% of pools and tokens on Uniswap are scams and rug pulls and it's even harder to figure out what's real.
Re: Crypto Wash Trading
#47This is great knowledge. People should not be investing based on what's popular or what is being traded. Better hold than gamble. Monetary speculation should be dumb in a sound money system
> Monetary speculation should be dumb in a sound money system
Yeah, but no one is listening. From the richest to the poorest, it's all about "to the moon." 50% of my family and friends have RobinHood accounts and are day trading crypto (usually doge or shiba) ... and don't even know what it is. (A dear friend even spent $15k on a rig and thought i was lying when i said his crypto wasn't actually "IN" his digital wallet.)
Re: Crypto Wash Trading
#48This 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 wh…
I'm generally pro-cryptocurrencies, but Uniswap definitly makes it harder to see wash trading, not easier. One wallet !== one person, while the regulated, centralized exchanges normally require you to answer bunch of questions and prove your identity because of KYC/AML laws, to guarantee that each participant is just that, one participant.
Yeah, decentralized exchanges really only protects against one type of wash trading (ie. from the exchange, to make it look more liquid than it really is).
Re: Crypto Wash Trading
#49Extremely sceptical that the volume is fake in the largest exchanges. You can see it's real for yourself by putting an order in the book and simulating when it should be filled and compare that to the actual fill. You'll see that they line up closely for the large exchanges which is strong evidence that the volume is real.
Can you explain in more detail, please?
Sorry if it should be obvious. I'm used to being 100% stupid at least 10% of the time
Re: Crypto Wash Trading
#50Can 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…
> 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).
No, you’re describing the wash sale rule, which has to do with which capital losses are tax deductible. It covers pairs of trades up to 30 days apart.
A wash trade is a trade with yourself. Both participants in the same trade — not two distinct trades.