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Crypto Wash Trading

arxiv.org

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Re: Crypto Wash Trading

#151

Post by capableweb »

avnfish wrote: post #59
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…

Breakdown of percentage per exchange is available on table 7 (pp 46). Binance, for example, is measured at 46%. Typically the lower tier exchanges have higher levels of measured wash trading.

Thank you, missed that when skimming.

Re: Crypto Wash Trading

#152

Post by tyrfing »

Spoofing, wash trading, etc have always been common in crypto. Market microstructure is much more adversarial than most markets. If you have an automated strategy that uses and assumes orderbook data and execution data accurately represents market conditions, you will lose your money.

Most exchanges will have "liquidity partners" who have better fee structures, possibly even zero fees. Most of these arrangements are not publicly disclosed. It's also commonly possible to open an order and then trade into your order yourself, although I haven't checked in quite a while and controls may be better now. (Doubt it.)

On a macro level, all this is mostly meaningless, and just a reason everyone ignores volume numbers for these exchanges. There's no reason for this net-neutral trading to affect market prices outside a second/minute time scale.

Re: Crypto Wash Trading

#153

Post by gillesjacobs »

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 extremely dubious in the field. [1]

"Abstract. Is Benford's law a good instrument to detect fraud in reports of statistical and scientific data? For a valid test, the probability of ‘false positives’ and ‘false negatives’ has to be low. However, it is very doubtful whether the Benford distribution is an appropriate tool to discriminate between manipulated and non-manipulated estimates. Further research should focus more on the validity of the test and test results should be interpreted more carefully."

1. https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1468-0475....

Re: Crypto Wash Trading

#154

Post by scotty79 »

whatshisface wrote: post #26
aeternum wrote: post #21

Earlier quoted context omitted.

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.

It makes bo sense when it comes to any popular cryptocurrency. The only way book can be small for these is on small exchange. But if you attempt to manipylate it to bring in away from current price on large exchanges you'll be immediately interfered with by people doing interexchange arbitrage. Also manipulating small exchange has small impact.

Re: Crypto Wash Trading

#156

Post by solveit »

dustingetz wrote: post #141
Closi wrote: post #132

Earlier quoted context omitted.

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

You don't even need to detect it. Name a single instance in human history where an unregulated and unaccountable industry didn't instantly degenerate into fraud. "2.5T" "dollars" (majority held by early insiders) is an incredible moral hazard

"I'm sure there is a lot of fraud" is very different from "This is the type of fraud that is going on and here is the evidence".

Re: Crypto Wash Trading

#157

Post by discodave »

JumpCrisscross wrote: post #128
bduerst wrote: post #57

Earlier quoted context omitted.

How does Coinbase self-regulate wash trading?

> 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?

Re: Crypto Wash Trading

#158

Post by JumpCrisscross »

tw600040 wrote: post #146
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.

Huh. What if 2 people decide to do it?

> What if 2 people decide to do it?

Two accounts trading back and forth will light up anti-spoofing tech from the 1980s. Keep in mind that the AML regulations Coinbase follows are specifically designed to catch fake money movement.

Re: Crypto Wash Trading

#159

Post by dragontamer »

thebean11 wrote: post #109
dragontamer wrote: post #91

Earlier quoted context omitted.

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 val…

Yes if it's a third party doing it, it's especially a win-win for the exchange as they are getting paid fees on all that transaction volume. I kind if assumed it was the exchanges themselves faking it. Wash trading without colluding with the exchange is pretty expensive.

All exchanges, even legitimate ones, offer discount packages on anyone who has high volume.

Ex: Interactive Brokers (a legitimate online exchange for stocks) hit it big with its monthly-subscription model: $$subscription / month $20 / for severely discounted trades (fractions of a penny per trade). https://www.interactivebrokers.com/en/index.php?f=1590&p=sto...

Re: Crypto Wash Trading

#160

Post by discodave »

tw600040 wrote: post #146
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.

Huh. What if 2 people decide to do it?

Pretty sure that none of the honest and upstanding people in the crypto-world would attempt to circumvent regulations like that!

/s

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