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

Best Owie

Last Updated: June 11, 2024 2:27 pm

3 mins read

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The daily bitcoin trading volumes come out into billions of dollars every day, with hundreds of thousands of daily transactions being carried out. It is one of the reasons why bitcoin draws the most investors, given such high trading volume and good depth across all exchanges. However, some on-chain analyzers have been diving into the blockchain to explore the daily BTC volume, and the findings of this study have been alarming.

More Than 50% Fake Volume

Mostly, in the present market, there is always some amount of volume for digital assets that are actually fake. These fake trading volumes are to make a digital asset look better than they actually do to make other investors put money into them. Smaller-cap altcoins are usually guilty of this to a large extent, but it seems the largest cryptocurrency by market cap is not left out of this.

Bankless Times carried out a study into the daily bitcoin volume for the year 2022 and found that the majority of the volume was actually fake. The study showed that 51% of bitcoin volume across various exchanges was actually a result of wash trading.

BTC maintains above $20,200 | Source: BTCUSD on TradingView.com

For those who do not know, the act of wash trading an asset is illegal because it creates a false narrative about that asset to make investors put their money into it. This way, they are trapped, and the wash traders walk off with millions of dollars in profit, depending on how large the scheme is.

The study unveiled that stablecoins were actually contributing largely to this wash trading volume. This means that the digital asset is seeing up to $10-$15 billion in fake volume across exchanges, giving rise to concerns about how this affects the cryptocurrency.

Impact On Bitcoin Price

To the unsuspecting eye, there might be no manipulation going on when it comes to the price of bitcoin, but this report from Bankless Times actually shows that the digital asset is being largely manipulated. Wash trading can easily affect the price of a digital asset by making it look like a profitable investment.

So say bitcoin is being wash traded across multiple exchanges; it deceives investors to believe that there is a large demand for the asset, leading them to purchase it. Thereby raising the digital asset of the cryptocurrency in the process.

With such a large volume of trading volume reportedly being fake, it begs the question of if the current BTC price is actually accurate. 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 from Forbes, chart from TradingView.com

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