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

Crypto News
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Daily bitcoin trading volumes come out in billions of dollars every day, with hundreds of thousands of daily trades being made. It is one of the reasons why bitcoin attracts the most investors given its high trading volume and good depth on all exchanges. However, some on-chain analyzers have delved into the blockchain to explore daily BTC volume, and the findings of this study are alarming.

More than 50% fake volume

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

Bankless Times performed a study in daily bitcoin volume for the year 2022 and found that most of the volume was actually fake. The study showed that 51% of bitcoin volume on various exchanges was actually the result of wash trading.

Bitcoin price chart from TradingView.com

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

For those who don’t know, washing an asset is illegal because it creates a false story about that asset to get investors to put their money into it. In this way, they are trapped and the laundromats walk away with millions of dollars in profit, depending on how big the plan is.

The study revealed that stablecoins actually contributed largely to this wash trading volume. This means that the digital asset will see up to $10-$15 billion in fake volume on exchanges, raising concerns about how it affects the cryptocurrency.

Impact on Bitcoin price

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

So suppose bitcoin is traded on multiple exchanges; it deceives investors into believing that the asset is in high demand, causing them to buy it. This increases the digital asset of the cryptocurrency in the process.

With such a large trading volume allegedly fake, it begs the question of whether the current BTC price is actually correct. A real volume of less than 50% of reported volumes would bring the value of the digital asset to about $12,000, if true.

Featured image from Forbes, chart from TradingView.com

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