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With exchanges becoming a focus as the FTX fiasco continues, a new research paper suggested that almost three out of four transactions in unregulated exchanges are fake.
A working paper titled “Crypto Wash Trading” was recently published by the National Bureau of Economic Research (NBER). Use statistical and behavioural models to identify legitimate and illegitimate transactions, the document reviewed 29 unregulated scholarships and concluded that, on average, over 70% of the volume inside the platforms are washing machines.
The researchers found that the volume of washing transactions of certain stock exchanges amounted to 80% of the total volume of transactions. The researchers wrote that in twelve "level 2 scholarships", washing professions amounted to nearly 80% of the total commercial volume. The researchers wrote:
“These estimates translate into wash trading of over 4.5 trillion USD in spot markets and over 1.5 Trillion USD in derivatives markets in the first quarter of 2020 alone.”
Researchers say there are short-term incentives for the laundry business. The study suggested that fake transactions often have an impact on classifying trade on website data and statistics as coinmarketcap. Moreover, counterfeit transactions also affect crypto prices in short-term exchanges.
Related: 40% of 40K respondents plan to buy crypto in 2023: Blockchain.com survey
Meanwhile, the FTX debacle continues to gain attention as wallets linked to Alameda Research have shown movements, funneling around $1.7 million in assets through crypto mixers. The movements were observed a few days after former FTX CEO Sam Bankman-Fried was released on a $250M bond.
As the FTX collapse damaged people’s trust in centralized exchanges (CEXs), executives working on CEXs have voiced their sentiments on how they could win back user trust. On November 25, Cointelegraph spoke with various crypto trade leaders and found that many are positive that the industry can still recover after FTX.
