Wash Trading Dominates Bitcoin Volume, What Does This Mean For Price?

With hundreds of thousands daily transactions, daily trading volume for bitcoin is in the billions. Given the high volume of trading and the good depth on all exchanges, it is one reason why bitcoin has attracted the greatest number of investors. Some on-chain analysts have looked into the blockchain for daily BTC volumes, and their findings have proven alarming.

Mehr than 50% of fake volume

Most often, the market has some volume that is fake for digital assets. This fake volume is used to create a false impression that a cryptocurrency has more trading than it actually does to convince other investors to invest in them. Although smaller altcoins tend to be more guilty, it is apparent that larger cryptocurrency markets are not immune. 

Bankless Times conducted a study on the daily volume of bitcoins for 2022. It found that most volume was fake. This study revealed that wash trading was responsible for 51% bitcoin volume on different exchanges.

Bitcoin price chart from TradingView.com

BTC remains above $20,000. Source: BTCUSD from TradingView.com| Source: BTCUSD on TradingView.com

The act of washing trade an asset is illegal. This creates a false narrative to investors about that asset, which makes it more attractive for them. The wash traders are caught in this trap and make millions depending on how big the scheme.

Study revealed that stablecoins are contributing to large amounts of this wash trading volume. The study revealed that digital assets are seeing fake volumes across multiple exchanges of between $10 and $15 billion. This raises concerns about the impact on cryptocurrency.

Prices and their Impact

The price of bitcoin may seem like there’s no manipulation to be seen, but this Bankless Times report shows the extent to which the asset has been manipulated. By making the digital asset look attractive, wash trading can affect its price. 

It is possible that bitcoins are being washed traded on multiple exchanges. This trick makes investors believe there is high demand, which leads them to buy it. The cryptocurrency is thus made a more valuable digital asset.

The large amount of reported trading volumes is allegedly fake. This raises questions about whether the BTC current price really does reflect reality. A real volume of less than 50% of reported volumes would put the digital asset’s value at around $12,000, if true.

Featured image by Forbes. Chart from TradingView.com

Follow Best Owie on Twitter for market insights, updates, and the occasional funny tweet…

Get more Crypto News at CFX Magazine