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Crypto Wash Trading

arxiv.org

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Re: Crypto Wash Trading

#91

Post by dragontamer »

thebean11 wrote: post #84
dragontamer wrote: post #63

Earlier quoted context omitted.

> You do NOT need to change the prices for it to be a wash trade. No you don't. But you do need to be buying and selling the underlying repeatedly for "some reason". That "some reason" could be fraud, or it could just be tax-optimization. The important thing is, "wash trading" is the technique of buying-and-selling the same thing at nearly the same time... which has many many applications. Many of those applications…

My guess is honestly just exchanges trying to get closer to the top of sites like coinmarketcap..

I mean, its win/win for the exchanges though?

Lets say rich person X wants to conduct large-scale wash-trades to artificially increase (or decrease) the price of [insert cryptocoin here].

By conducting it on Exchange-Foobar, Foobar's traffic goes up, while rich person X gets the price change they want. Win-win for both parties.

EDIT: Remember: exchanges win on volume. They want more trades, they don't care if the value goes up or down.

Re: Crypto Wash Trading

#92

Post by jollybean »

Wash trading would be less of a problem if there was an independent way of valuing the asset, and we didn't derive our 'value' of the asset from what 'the last guy traded at'.

It's an inherent, infallible weakness of the type of asset.

I can't fathom how we haven't arrived at the general consensus that it's just a big scam.

I suggest that large portions of our economy depend on hype.

People Magazine generally won't say hugely negative things about celebrities, because celebrities are their currency, it's what they are selling. They're selling the illusion of celebrity, and they work with press agents etc. to concoct all of it. Talking any kind of 'reality' would be detrimental to their core business.

In much the same way, the press, including the Tech Press relies on a kind of naive, hopeful, optimism, blended with the dream of riches, or at least for others. The 'drama' of Musk, Zuck etc. keeps the clicks moving.

Re: Crypto Wash Trading

#93

Post by temp8964 »

nefitty wrote: post #66
cdiddy2 wrote: post #28

Earlier quoted context omitted.

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

The market is interdependent. Wash trading on one platform benefits all other platforms. When you ask someone the price of BTC they don't say $x on Coinbase, $y on Kraken, etc. Literally all of crypto is a scam. After 10 years there is not one feasible use case that isn't done better through another tool. I don't consider "making black markets and extortion easier" a feasible use case.

What if the reason of slow adoption is traditional institutions act against it?

Re: Crypto Wash Trading

#94

Post by PragmaticPulp »

bugzz wrote: post #89
PragmaticPulp wrote: post #86

Earlier quoted context omitted.

The trick to wash trading on CoinBase is (or was) to be on the inside: > The order also finds that over a six-week period—August through September 2016—a former Coinbase employee used a manipulative or deceptive device by intentionally placing buy and sell orders in the Litecoin/Bitcoin trading pair on GDAX that matched each other as wash trades. This created the misleading appearance of liquidity and trading interes…

Yeah that's a pretty well known case, specific to Litecoin. Also crypto has come a long way since 2016

I imagine the fraudulent schemes have also come a long way since 2016.

Given the volume of trading that happens on unregulated exchanges, I don’t see why anyone would think the amount of fraud has been decreasing as unregulated activity is increasing.

Re: Crypto Wash Trading

#95

Post by teitoklien »

joshfraser wrote: post #87
teitoklien wrote: post #76

Earlier quoted context omitted.

.... People pay for volume on uniswap daily ... They just spin up new wallets and keep making them exchange very high amounts of a token (10ETH buy , 10 ETH sell , multiple times) (net expense is just the gas fees, but they get paid wayyy more to do this). This is usually done to get uniswap traded tokens onto various trending lists like cmc , dextools , etc. I’d say there is 10-40x the fraud on uniswap than on centr…

That doesn't pass the smell test. Sure, you can wash trade on Uniswap, but it's expensive and everyone can see you doing it. The fee on most pools on Uniswap is 0.30%. In contrast, wash trading on most centralized exchanges is cheap or free and very hard to prove unless you have access to their internal data.

Im specifically talking about up and coming , memecoins.

The liquidity pool on these are usually provided by token owner themselves, fee doesnt matter there (gas fees does, but they make much much more by doing this).

Tokens like these need these fake volumes to get the necessary amount of holders , publicity and volume to qualify to be listed on centralised exchanges.

Even when everyone can see you do it, owners of popular trending lists which list these tokens, intentionally look the other way on this wash trading and just need it for fulfilling listing requirements.

Re: Crypto Wash Trading

#96

Post by ziddoap »

pja wrote: post #51
capableweb wrote: post #43

Earlier quoted context omitted.

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.

It’s right there in the abstract.

When the title just says "70% of the volume in the top crypto exchanges", perhaps you can forgive the skim-readers of the world for believing they meant "top crypto exchanges", as stated, rather than "top unregulated changes".

Sometimes it's nice for the title to honestly represent what the paper/blog/whatever is about without having to dive into the abstract.

I think there might even be some word for having titles which somewhat misrepresent the piece in question, often used when the title elicits more clicks by leaving out a key piece of information.

Re: Crypto Wash Trading

#97

Post by catern »

gomox wrote: post #68
capableweb wrote: post #35

Earlier quoted context omitted.

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.

Actually with gas costs being what they are, wash trading is extremely costly on Ethereum DEXs, which makes their volume much more reliable. Wash trading relies on low/nonexistent fees to be cost effective as a market signal.

Interesting! That reminds me of the argument that market manipulation makes markets more efficient by increasing the reward available to honest participants. Wash trading being discouraged by high trading fees doesn't have the same incentive structure, but I wonder if you could arrange it the same way?

Re: Crypto Wash Trading

#98

Post by knodi123 »

thebean11 wrote: post #83
SavantIdiot wrote: post #47

Earlier quoted context omitted.

> 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 wall…

What do you mean by "IN"? Are dollars "IN" your bank account? I'm not trying to make a tired argument about dollars being fake or something, I just don't see the distinction as far as wallets specifically are concerned.

With cash, if you put a fortune in your shoebox it is "IN" your shoebox. The whole point of bitcoin is the distributed nature. Your wallet can be copied without altering any actual holdings or values, whereas a shoebox cannot.

A bitcoin wallet is more like a safety deposit box key, than an actual box itself.

Re: Crypto Wash Trading

#99

Post by csee »

gota wrote: post #49
csee wrote: post #32

Extremely 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

Sure. Suppose there's 8 on the best bid and then you send a limit buy order of 1 quantity to the same price, making it 9 in total after your order arrives. Then after that, suppose a trade is shown with volume 9 at that price level. What this event implies is that someone sold into the best bid and took it out completely. If this trade volume is fake in any way, then your order won't get filled. But in reality, that never happens on the large exchanges. Your order will always get filled when you expect it to, meaning that the volume is real. If the volume was fake it'd be easy to prove. Just put a limit order in the book, record your screen, and prove that you didn't get a fill that you should have gotten. That won't happen in the large exchanges because the volume isn't fake.

Re: Crypto Wash Trading

#100

Post by floatingatoll »

mumblemumble wrote: post #67
capableweb wrote: post #43

Earlier quoted context omitted.

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.

I'd argue that the original article's title was fine; they were indeed looking for wash trading across all the crypto exchanges. The second sentence of the abstract was basically, "Trading activity on regulated exchanges looks fine, but the unregulated ones are a hot mess." It's just the altered title for the HN submission that is actively misleading.

Email the site mods using the footer contact link. Sometimes they reply in minutes. Put “FP #1” and “misleading title” somewhere in the subject.
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