The Blockchain Transparency Institute or the BTI spent the previous four months working on a new algorithm, designed to identify individual accounts on cryptocurrency exchanges that are involved in wash trading. The BTI, a group of researchers, aims to bring more transparency to the cryptocurrency market. After months of research, the BTI discovered that more than 10 percent of trading on Binance is wash trading. Wash trading is a form of market manipulation, in the process, the trader buys and sells a security for the express purpose of feeding misleading information to the market.
Majority of the wash trading was observed on 30 trading pairs on the exchange, some pairs showed signs of up to 75 percent wash trading volumes. Ethereum and Bitcoin were said to have 85 to 95 percent of legitimate volume.
Since many players profit from deceptive practices in the cryptocurrency market, such practices are likely to continue. Kraken, Coinbase, Bitso are few exchanges that work with regulators to maintain almost 100 percent accuracy in their volumes. On the contrary, there are many others that enjoy little and often no regulatory oversight.
Until such practices are erased completely from the cryptocurrency market, that will allow better implementation of the technology, investors will be exposed to a wide range of risks. The director of research at The Block, Larry Cermak highlighted that the BitMex index can be easily manipulated to liquidate thousands of transactions on the platform. Alon Karniel, the COO of Algoz in a recent interview explained that exchanges benefit most from such deceitful activity as it makes them more appealing to upcoming startups.