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Crypto Wash Trading

arxiv.org

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Re: Crypto Wash Trading

#161

Post by JumpCrisscross »

discodave wrote: post #157
JumpCrisscross wrote: post #128

Earlier quoted context omitted.

> How does Coinbase self-regulate wash trading? Coinbase follows KYC laws. That prevents one person from opening two accounts and trading between them.

Does that mean they don't try to prevent a group of individuals coordinating wash trading between their accounts?

> Does that mean they don't try to prevent a group of individuals coordinating wash trading between their accounts?

To wash trade effectively for more than a single instance one needs hundreds to thousands of accounts. Somebody could coördinate that many people. But it's hard. And it creates exhaust lights up law enforcement radars, as it's practically indistinguishable from money laundering.

Re: Crypto Wash Trading

#162

Post by danans »

thenanyu wrote: post #71
nefitty wrote: post #66

Earlier quoted context omitted.

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.

But it is a use case, along with gambling via crypto day trading. You may not like it morally and may wish for crypto to be legally banned as a result, but casinos are real and extortion is real.

You are both right, but unlike crypto, casinos and crime facilitating black markets don't pretend to be something other than what they are.

However, I tend to think crypto is a bit more than that: an anti institutional weapon.

Therefore it's not a coincidence that crypto also serves the above use cases that specifically seek to avoid institutional oversight, or in circumstances where institutions have already failed (i.e. Venezuela).

Once the illusions of anarcho-capitalist utopia dissolve, that's what's left, and crypto's fundamental market value - minus the greater fool stuff - reflects the sum of 1) the fear of and 2) enthusiasm for the destruction of institutions, with both of those pushing the value up.

Stronger, trusted, adaptive, and accountable institutions that provide their societies with security and broadly shared well being will push it down.

Re: Crypto Wash Trading

#163

Post by EGreg »

How exactly would someone distinguish wash trading from legitimate trading? Someone could just be generating volume from one account, or legitimately swing trading.

The only way I can see to distinguish it is if there are fees to making too many transactions per week. Like a "free tier" of transactions and then you pay if you want to transact a lot. That's the proper way to charge fees for mainstream payment networks, btw, rather than how they do it now. Anyway, then the problem becomes how do you mitigate sybil attacks.

Wash trading is a bug in the SYSTEM, and it should be the designer's responsibility to prevent it, not the government's. But the SYSTEM designers don't necessarily WANT to fix it, anymore than they want to fix sybil attacks when they're growing (Twitter or YouTube in startup phase being able to detect and deplatform oodles of new active accounts or content, is against their incentives to attract more money by reporting higher numbers, even if they are bots and illegally uploaded content). Same here.

Re: Crypto Wash Trading

#165

Post by nightski »

SavantIdiot wrote: post #47
cblconfederate wrote: post #18

This 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 wall…

Well technically your private key is "IN" the wallet which is how you access the funds. So it's pretty close to the same thing.

Re: Crypto Wash Trading

#166

Post by gillesjacobs »

PaulHoule wrote: post #137
gillesjacobs wrote: post #118

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 tradi…

It's hard to tell wash trading from legitimate trading. Because I'm involved with a committee on financial semantics I wound up learning a bit about swap trading. For stocks if you don't like your long or short position you can buy or sell and it is done. In the case of swaps if you don't like your position you write another swap contract that is the opposite of the one you don't like. Both are on the books. In the 2…

It will be nigh impossible to prove wash trading without the exchange being very obvious or primary trader identification.

Famously, a Mt. Gox data leak actually proved wash trading on that exchange conclusively as same trader IDs took their own orders. [1] So there definitely is proven precedent in the crypto market.

I am not saying it doesn't happen and isn't likely on unaudited/unregulated exchanges. I just want to highlight that the authors make very strong claims and alternative explanations should be explored.

1. https://dx.doi.org/10.2139/ssrn.3362153

Re: Crypto Wash Trading

#167

Post by ur-whale »

Closi wrote: post #132
gillesjacobs wrote: post #118

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 tradi…

Benford's Law is a pretty established method of detecting fraud in forensic accounting.

> Benford's Law is a pretty established method of detecting fraud in forensic accounting

Benford law never had to deal with exchanges where any customer can write a python bot and start trading at sub-second latencies via the exchange API's.

I'd be very surprised if whatever statistical model they're relying on is in any way a match for what real (as in: legitimate orders from actual customers) trading goes on on crypto exchanges.

Re: Crypto Wash Trading

#168

Post by nefitty »

_3u10 wrote: post #120
nefitty wrote: post #66

Earlier quoted context omitted.

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.

That's how all Ponzi schemes are marketed. "I got rich, so can you!"

Re: Crypto Wash Trading

#169

Post by teitoklien »

joshfraser wrote: post #143
teitoklien wrote: post #95

Earlier quoted context omitted.

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…

You can't do it without putting significant capital at risk since you also have to supply the other side of the pair. If there is no organic demand for your memecoin, people will be happy to dump it and take your ETH.

Except there is, they spend money on marketing and fill up telegram groups with tons of people who fall for this scam everyday, 90% of telegram groups involving crypto tokens are scams like these.

People get scammed daily by this.

Re: Crypto Wash Trading

#170

Post by ur-whale »

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…

> I recently had to go through extensive KYC/AML

I'm not entirely sure how KYC/AML are related to wash trading ...

In other words: how is the amount of checks they impose on their customers related to what goes on in their trading engine?

Or do you assume that because they're very strict on one thing necessarily implies they're strict everywhere?

That's quite a stretch.

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