BlocksInform
Crypto token wash trading on centralized exchanges will be the cause of the next crypto “implosion,” according to billionaire Dallas Mavericks owner and crypto investor Mark Cuban.
In a street interview about Jan. 5, the billion investor estimated that 2023 will not run out of crypto scandals after the many fiascos that shook 2022.
Cuban, who has backed several crypto and Web3 startups, said he believes the next biggest thing to impact the industry will be "the discovery and removal of wash trades on central exchanges.”
“There are supposedly tens of millions of dollars in trades and liquidity for tokens that have very little utilization,” he said before adding, “I don't see how they can be that liquid.”
Wash trading, which is illegal under U.S. law, is a process by which a merchant or robot purchases and sells the same crypto asset to provide misleading information to the marketplace.
The objective is to artificially inflate the volumes so that retail merchants jump on the bandwagon and make prices rise. It's basically a pumped-jettison system.
Cuban said he was just making a prediction, adding "I have no details to suggest to back up my assumption."
As much as 70% of the volume on unregulated exchanges is wash trading, according to a December report by the National Bureau of Economic Research (NBER).
The researchers used statistical and behavioural models to identify legitimate and false transactions.
Furthermore, a 2022 study by Forbes on 157 centralized exchanges found that more than half the Bitcoin trade volumes were fake.
Related: Mark Cuban to Bill Maher: You've got gold, you're stupid... Just get Bitcoin.’
However, wash trading is more than just centralized trading. On Jan. 5, Quantum Economics CEO and former eToro senior market analyst Mati Greenspan said that 42% of all NFT volume is wash traded.
Yeah. It's 2023 and we're talking about the laundry business again. https://t.co/y9kiLbu4Eu
— Matt Green Pan (@MatiGreenspan) January 5, 2023
He added that wash trading is also used to harvest tax losses, making it appear (to the taxman) that there has been a greater loss than in reality.
