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Wash trading at cryptocurrency exchanges

Author

Listed:
  • Pennec, Guénolé Le
  • Fiedler, Ingo
  • Ante, Lennart

Abstract

Cryptocurrency exchanges allegedly use wash trading to falsely signal their liquidity. We monitored twelve exchanges for metrics of web traffic and for their administered user funds. The exchanges were clustered in three distinct groups based on previous findings: (1) accurately-reporting exchanges, (2) exchanges that engaged in wash trading, (3) exchanges with mixed evidence of wash trading. A comparison of the reported to the predicted trading volume, calibrated on the accurately-reporting exchanges, suggests that group 2 exchanges exaggerate their true volume by a factor of 25 to 50, and exchanges of group 3 by a factor of 1.25 to 33.

Suggested Citation

  • Pennec, Guénolé Le & Fiedler, Ingo & Ante, Lennart, 2021. "Wash trading at cryptocurrency exchanges," Finance Research Letters, Elsevier, vol. 43(C).
    • Handle: RePEc:eee:finlet:v:43:y:2021:i:c:s1544612321000635
    DOI: 10.1016/j.frl.2021.101982
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    Citations

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    Cited by:

    1. Urom, Christian & Ndubuisi, Gideon & Guesmi, Khaled, 2022. "Dynamic dependence and predictability between volume and return of Non-Fungible Tokens (NFTs): The roles of market factors and geopolitical risks," Finance Research Letters, Elsevier, vol. 50(C).
    2. Jalan, Akanksha & Matkovskyy, Roman & Yarovaya, Larisa, 2021. "“Shiny” crypto assets: A systemic look at gold-backed cryptocurrencies during the COVID-19 pandemic," International Review of Financial Analysis, Elsevier, vol. 78(C).
    3. Agostino Capponi & Ruizhe Jia, 2021. "The Adoption of Blockchain-based Decentralized Exchanges," Papers 2103.08842, arXiv.org, revised Jul 2021.
    4. Lin William Cong & Xi Li & Ke Tang & Yang Yang, 2023. "Crypto Wash Trading," Management Science, INFORMS, vol. 69(11), pages 6427-6454, November.
    5. Foley, Sean & Krekel, William & Mollica, Vito & Svec, Jiri, 2023. "Not so fast: Identifying and remediating slow and imprecise cryptocurrency exchange data," Finance Research Letters, Elsevier, vol. 51(C).
    6. Patel, Ritesh & Migliavacca, Milena & Oriani, Marco E., 2022. "Blockchain in banking and finance: A bibliometric review," Research in International Business and Finance, Elsevier, vol. 62(C).
    7. Ioannis Giagkiozis & Emilio Said, 2023. "Reconciling Open Interest with Traded Volume in Perpetual Swaps," Papers 2310.14973, arXiv.org, revised Apr 2024.
    8. Lin William Cong & Xi Li & Ke Tang & Yang Yang, 2023. "Crypto Wash Trading," Management Science, INFORMS, vol. 69(11), pages 6427-6454, November.
    9. Vidal-Tomás, David, 2022. "Which cryptocurrency data sources should scholars use?," International Review of Financial Analysis, Elsevier, vol. 81(C).
    10. Serneels, Sven, 2023. "Detecting wash trading for nonfungible tokens," Finance Research Letters, Elsevier, vol. 52(C).
    11. Graf von Luckner, Clemens & Reinhart, Carmen M. & Rogoff, Kenneth, 2023. "Decrypting new age international capital flows," Journal of Monetary Economics, Elsevier, vol. 138(C), pages 104-122.
    12. Weber, Daniel, 2022. "Exploring markets: Non-Fungible Token," IU Discussion Papers - Business & Management 2 (April 2022), IU International University of Applied Sciences.
    13. Laurens Swinkels, 2023. "Empirical evidence on the ownership and liquidity of real estate tokens," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-29, December.
    14. Mingxiao Song & Yunsong Liu & Agam Shah & Sudheer Chava, 2023. "Abnormal Trading Detection in the NFT Market," Papers 2306.04643, arXiv.org, revised Aug 2023.
    15. Umar, Zaghum & Gubareva, Mariya & Teplova, Tamara & Tran, Dang K., 2022. "Covid-19 impact on NFTs and major asset classes interrelations: Insights from the wavelet coherence analysis," Finance Research Letters, Elsevier, vol. 47(PB).
    16. Qi Deng & Zhong-guo Zhou, 2024. "Liquidity Jump, Liquidity Diffusion, and Treatment on Wash Trading of Crypto Assets," Papers 2404.07222, arXiv.org, revised Apr 2024.

    More about this item

    Keywords

    Bitcoin; Ethereum; Blockchain; Trading volume; Fake volume; Market manipulation;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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