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Crypto Wash Trading

arxiv.org

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Re: Crypto Wash Trading

#111

Post by mcintyre1994 »

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?

Does this apply to NFTs though, where you're usually talking about a unique NFT within a collection of a few thousand? If you hold a unique NFT and trade it to yourself for a crazy amount of money just once, then that's what everyone is going to see as the last sale price of that NFT. They're not trading often anyway usually, people would probably be more suspicious if you had hundreds of trades.

Edit: I was mixing this up with another conversation, the parent comment obviously isn't about NFTs. I'll leave this here though because I think wash trading is even more relevant to them.

Re: Crypto Wash Trading

#112

Post by thebean11 »

knodi123 wrote: post #98
thebean11 wrote: post #83

Earlier quoted context omitted.

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.

That's not the comparison I made. I'm talking about a bank account not holding physical bills.

Re: Crypto Wash Trading

#113

Post by joshfraser »

capableweb wrote: post #65
anonu wrote: post #58

Earlier quoted context omitted.

What's a "regulated" exchange in this context? US Exchanges are "self-regulated" and ultimately answer to FINRA and the SEC. Any rules they publish must be approved by the SEC. Theres no such process (AFAIK) with "panel A" firms. Its still the wild west. Does regulation mean KYC for client onboarding? Thats a completely different thing. We're not talking about on-exchange trading rules and compliance monitoring in th…

Why don't you read through the paper? Here is the short answer: > We adopt the definition of regulated exchanges from the state of New York, which has one of the earliest regulatory frameworks in the world. [6] > 6 Regulated exchanges are issued BitLicenses and are regulated by the New York State Department of Financial Services. Bitlicence carries some of the most stringent requirements. Our main results are robust…

Lest anyone think that the solution is more regulation, it's worth looking at the impact of the BitLicense. This overbearing regulatory framework has stifled innovation and forced crypto startups to leave the world’s leading financial hub and build their companies elsewhere. Compliance costs millions of dollars, leaving most startups with no viable option except to block their users from accessing their services in NY. No one wins. In their misguided attempt to protect their citizens, they inadvertently blocked New Yorkers from participating in the best performing asset class of the decade.

Re: Crypto Wash Trading

#114

Post by bsamuels »

arlcode wrote: post #40

I'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.

There's a lot of uninformed takes in this thread, but this really takes the cake. There is literally nobody in the Ethereum space who sees MEV as anything other than rent extraction.

Flashbots' mission is for MEV to disappear. They're doing that by making it a more open process and to prevent MEV extraction from making the chain unusable via high gas fees.

Flashbots RPC exists as a feature because private txPools/RPCs are the only way to be absolutely sure your transaction won't have MEV extracted from it. If Flashbots wanted more MEV, they would only allow transactions via Flashbots RPC that cannot be MEV extracted.

By allowing MEV-extractable transactions on Flashbots RPC, they effectively reduce the amount of MEV that is mined.

Re: Crypto Wash Trading

#117

Post by tata71 »

coding123 wrote: post #104
joshfraser wrote: post #78

Earlier quoted context omitted.

Oh yeah? Ever tried to send funds to a family member on the other side of the world over a weekend?

Not on the other side of the world but my parents send me through Zelle and works pretty easily - hits the account same day.

I tried Zelle the other day to send a payment.

New user? Payment frozen, no recourse until Monday morning on a Friday, late afternoon.

I'll stick with Coinbase, if I want centralized risk.

Re: Crypto Wash Trading

#118

Post by gillesjacobs »

This paper jumps the gun. Detecting wash trading by examining distributions over rounded order prices is a strong and dubious claim for which they provide little evidence. The author's equate wash trading to non-rounded, clustered prices which really just indicates automated trading. Now automated ("bot") trading is a technology needed for exchanges wash trading sure, but not exclusive evidence of it.

Automated trading strategies (e.g., "grid trading") are really popular and there are many third party bot providers that integrate in multiple exchange APIs. Maybe the unregulated class of exchanges here just has more permissive APIs/automation than the regulated ones. Automated trading is still legitimate trading where a party puts their capital on the line.

I agree that the lack of rounding and trade size clusters is a likely approximate indicator of non-human orders. The presence of automated orders does not automatically mean there is fraudulent wash trading by the exchange.

The authors also do not cite previous research or evidence of their methodology working for traditional finance. It all makes for weak evidence of actual wash trading.

Re: Crypto Wash Trading

#119

Post by teitoklien »

zeroxfe wrote: post #103
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…

> I’d say there is 10-40x the fraud on uniswap than on centralised exchanges This makes no sense, especially if you factor in gas prices, pool fees, and volume.

1- Gas price, to them its not a significant amount, its a business expense, they profit much more, when the token gets listed on popular lists due to this, which brings up new holders , who pump up the mcap by a lot, as the lp pool on these tokens is very small (only a couple of million dollars, compared to mcap which is way higher)

2- pool on tokens like these are usually only made by the owner themselves, so pool fees goes back to them.

3- They do this to invite new people, and then inflate the token price, and rug them by either pulling the entire lp, or just exit it , in a few mins.

Some also do this, to qualify for potential centralised exchange listing, down the line (instead of rugging).

Re: Crypto Wash Trading

#120

Post by _3u10 »

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.

Completely agree, I’d much rather lose at least 6.2% (if not 20%) in totally legitimate fiat currency inflation than see 200% returns on crypto as a result of that money printing.

QE definitely isn’t wash trading.

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