At least 70% of transactions on unregulated exchanges could be fake, says study

For Angel DiMatteo @shadowargel

According to the study, high volumes of fake transactions help give such exchanges greater visibility, while inorganically inflating the prices of major cryptocurrencies on said platforms.


  • Three out of four transactions on unregulated exchanges could be fake
  • It is estimated that more than USD $4,500 million are moved in inorganic operations
  • This better positions exchanges in rankings managed by various services.
  • Exchanges are currently going through a crisis of confidence after what happened with FTX

According to recently published research, at least three out of four transactions made on unregulated exchanges could be fake, so 70% of global volume would correspond to fake trades to inflate figures.

High inorganic volumes

The research in question is the study “Crypto Wash Trading”published by the National Bureau of Economic Research (NBER), private non-profit research organization in the United States. Using statistical patterns and user behavior to determine which transactions were legitimate or not, the researchers examined the trading volume of at least 29 unregulated exchanges, coming up with the aforementioned figures.

According to the study, the volume of false or laundered operations ranges from 70% of the transactions registered by the exchange platforms. In particular, the researchers found that in at least 12 of the entities examined this percentage reached 80% of the total volume recorded.

In this regard, the researchers stated:

These estimates translate into laundering operations of more than $4.5 billion in spot markets and more than $1.5 billion in derivatives markets in the first quarter of 2020 alone.

Regarding the reasons behind these practices, the researchers highlight that the high volumes of fake transactions help these exchanges to gain more notoriety in web services such as CoinMarketCap, scoring them higher within the listed rankings. However, the researchers also allege that this high flow of irregular operations also has an effect on the price of cryptocurrencies, which are artificially inflated within said platforms.

Exchanges must operate with transparency

The publication of this study comes in the midst of the crisis of confidence that affects the sector of crypto exchanges, since the collapse of FTX it generated suspicion among investors and regulators about the practices carried out by said entities and if they compromise the capital of users.

Against this background, exchanges such as Binance, Kraken, Coinbase and many others are implementing measures to convey more transparency about their operations. For example, there is the publication of “Reserve Tests”, in which the platforms have made public information associated with the support of user funds, as well as carrying out external audits to certify the existence of said assets.

In the framework of this situation, the crypto winter that shakes the market also continues its course. cryptocurrencies like Bitcoin Y ethereum They register prices that would be almost 70% below the all-time highs seen in November 2021, a situation that has led important companies in the sector to implement measures to mitigate expenses and maintain their operations.

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Article by Angel Di Matteo / DailyBitcoin

Picture of Unsplash

CAVEAT: This is an informative article. DiarioBitcoin is a communication medium, it does not promote, endorse or recommend any investment in particular. It is worth noting that investments in crypto assets are not regulated in some countries. They may not be suitable for retail investors, as the entire amount invested could be lost. Check the laws of your country before investing.