What is Wash Transaction? Mark Cuban predicts it will ‘blow up’ the crypto sector
After the crypto sector bottomed out in the overall commercial sector in 2022, investors head into 2023 hoping to see an improvement to market sentiment. Billionaire pro-cryptocurrency Mark Cuban has predicted that 2023 will have its own scandals. Cuban has predicted that the illegal behavior of wash trading will cause more financial problems for the already volatile and scrutinized industry. The American business magnate has warned all centralized exchanges to start devising strategies to identify and report money-laundering merchants.
What is Cryptocurrency Asset Laundering?
When a group of traders or bots intentionally engage in buying and selling the same crypto-assets to increase the price, the process is known as wash trading. In this way, a broker and a trader often come together to make a profit after introducing organized misinformation into the market.
The price of crypto-assets may still be rising at the time when wash traders are working with them, but as soon as they suspend activity, the price of the asset can drop — leaving other unsuspecting investors in trouble. financial risk.
Not only in the crypto space, wash trading also endangers investors in other assets such as stocks.
3/ This is a worrying sign and something all crypto investors should know; Wash trading can lead to market manipulation and artificially inflate asset prices, eventually leading to a market boom.
– Shrey Jain (@Shreyjain3110) January 6, 2023
The United States has deemed wash trading an illegal and punishable offense.
Usually, wash traders exploit centralized exchanges to execute their actions. Some popular centralized exchanges include exchanges, Coinbase, Krakenand KuCoin among others.
In March 2021, Coinbase agreed to a $6.5 million deposit (approximately Rs. 53 crore) to settle a complaint that its former employees were wash trading Bitcoin and Litecoin. The claim was made by the Commodity Futures Trading Commission (CFTC), which also report alleging that Coinbase reported inaccurate information about transactions on its platform.
In 2022, one Forbes report analyzed trading activities on 157 centralized exchanges and discovered that more than 50% of the total Bitcoin transaction volume obtained was fake.
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