September 30, 2019 – Market manipulation are trading strategies by traders, brokers or even an exchange firms that conduct buys and sells in a securities market (Allen and Gale 1992). A general type of market manipulation in the crypto market is wash trading. For instance, you’ll observe the repeated buys and sells on the crypto exchange that looks automated, match in amount and wash each other out. One factor of market manipulation is information asymmetric where one party has better information than the other party. The key players in wash trading are;
- Traders, insiders, and brokers working together to post fake trades.
- Investors of varying sizes (usually big) performing both the buys and sells of a particular security
- Exchanges that trade on their platform, as we are seeing with crypto exchanges in the current market.
What is BTI Market Surveillance – September 2019 Report?
BTI verified program validates the accuracy of cryptocurrency exchange volumes. During the period since the program was launched, they received cooperation from many exchanges, wherein they received substantial data and figures. According to the released BTI report, the cleanest exchanges over time are Kraken, Poloniex, Coinbase, and Upbit. In contrast, OKEx and Bibox lead the exchanges with the highest percentage of wash trading in the real ranking of Top – 40.
OKEX claimed: An Apple-to-Orange Comparison
Cryptocurrency exchange OKEx has refuted allegations of manipulative practices such as wash trading on its platform. OKEx was notably singled out by BTI. Last September 24, 2019, OKEx CEO Jay Hao invited researchers to partake in a bet and argued that from 90% tO 72.3% volume “BTI’s research methodology is not transparent and do not provide data to back up their claims.” He also said:
“Due to the complexity of derivative instruments trading, thousands of trades could be placed per day by a single user via collocated machines. Attempting to use retail-oriented parameters such as website/mobile traffic in any research de-facto an apple-to-orange comparison.”
Blockchain Transparency Institute side
In response to a question about their methodology to verify volume, BTI told CCN that releasing the strategy would jeopardize their process;
“We have algorithms that we have tested over the past year across all exchanges from small to large. Our data scientists developed our methodology from patterns seen across these tests. We find ourselves in a difficult situation because giving our exact formula to the public will give those faking volume a roadmap on how to beat our system and defeat the purpose of our mission.”
With regulation and self-regulation within the crypto community still developing, it seems that many exchanges are taking advantages of this area. So look at those exchanges that opt for self-regulation. Unfortunately, it seems that the largely unregulated nature of crypto exchanges still makes it too easy to mislead.
This article is published on BitPinas: Wash Trading Research and Allegations Rock Crypto Exchanges