By George Ward
In the past few weeks, crypto exchanges have come under intense scrutiny. According to a new study, about three of every four crypto transactions in unregulated exchanges are unreal.
NBER Study Raises Alarm Over Wash Trading
The NBER (National Bureau of Economic Research) recently published a paper called “Crypto Wash Trading.” The research institute used behavioral and statistical patterns to evaluate crypto transactions.
The aim was to identify those that were real and those that were not. NBER examined 29 unregulated exchanges and concluded that over 70% of most transactions in such exchanges were ‘wash trades.’
According to the report, the wash trading volume in some exchanges reached about 80% of their trading volume.
“In 12 “tier-2 exchanges,” 80% of their trading volume were wash trades,” the report stated.
The researchers stated that, in Q1 2020, the total sum spent on wash trading amounted to over $1.5 trillion in derivatives markets and $4.5 trillion in spot markets. Meanwhile, the researchers noted that wash trading has some short-term benefits.
These exchanges use fake transactions to boost their ranking on on-chain data websites such as CoinGecko and CoinMarketCap.
Additionally, fake transactions can artificially inflate the prices of digital currencies in the short term.
Alameda Research Wallets Become Active
In other news, the FTX crisis keeps gaining traction as new events come to light. Recently, wallets connected to Alameda Research have become active.
According to reports, the wallets have moved assets worth over $1.7 million using crypto mixers in the past few days. The 30 crypto wallets linked to the firm became active on December 28th.
They have been inactive for over four weeks following the company’s bankruptcy. The wallets have swapped and mixed crypto assets.
Criminals and fraudsters use crypto mixers to hide their crypto transaction path. This makes it difficult for authorities to track the origin and destination of such funds.
However, the recent movement of assets a few days after the US court released Sam Bankman-Fried on bail is suspicious. Meanwhile, the FTX saga has affected investors’ trust in CEXs.
However, executives of top crypto exchanges believe crypto firms can regain users’ trust. Dion Guillaume, a Gate.io executive, argued that exchanges must become transparent when handling users’ assets.
Also, the CEO of Bitpanda, Eric Demuth, said centralized exchanges must give people a reason to trust them. Other executives believe that crypto exchanges will recover from the side effects of the FTX debacle.