Decentralized crypto exchanges are seeing a rampant surge in 'wash trading' activity — a form of market manipulation via artificial transactions on both mainstream and meme tokens — amounting to a minimum of $2 billion in overvalued assets being traded or in circulation. Solidus Labs Co-Founder and Chief Experience Office (CXO) Chen Arad explains the crypto firm's latest report verifying wash trade volumes and how to best identify fraud across liquidity pools. 'Often times, wash trading is often used ultimately to inflate volumes and give the appearance of additional trading, more trading that actually happened,' Arad says. 'It's a good way for scammers or for people who often circulate malicious crypto tokens to create the appearance of activity, to drive prices up in a way that is unfair.' Arad also notes which crypto assets are being used to facilitate wash trading behaviors.
Decentralized crypto exchanges are seeing a rampant surge in"wash trading" activity — a form of market manipulation via artificial transactions on both mainstream and meme tokens — amounting to a minimum of $2 billion in overvalued assets being traded or in circulation.crypto firm's latest report"Often times, wash trading is often used ultimately to inflate volumes and give the appearance of additional trading, more trading that actually happened," Arad says.
Here for a deeper dive, let's bring in the founder-- co-founder and chief experience officer Chen Arad. Chen, it's good to talk to you today. Your report specifically highlights 67% of crypto trades manipulated by wash traders. What does that mean from a pricing standpoint?Thank you so much. It's great to be here. Important to say 67% of liquidity pools that we looked at-- liquidity pools are an important building block of every decentralized exchange.
So again, wherever there are markets, there's manipulation. Crypto introduces a lot of new ways to do this, because it reinvents trading in some ways. And of course, our goal here is to highlight that this is a problem, but that there's a way to solve it. And it's actually easier to identify in a decentralized exchanges because of the transparency of the blockchain.And so Chen, you talk about the impact here of this manipulation on investors.
You know, I'll say, you know, of the 30,000 liquidity pools-- and again, those are the building blocks of decentralized exchanges-- that we looked at, we found-- of all of that volume, about 13% is manipulated. Some could argue that it's relatively low, lower than maybe some would have assumed existed in DeFi. So again, learn, study, look for a lot of publicly available information. And utilize the transparency in order to avoid being scammed and manipulated.
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