Crypto token washout trading on centralized exchanges will be the cause of the next crypto “implosion,” according to billionaire Dallas Mavericks owner and crypto investor Mark Cuban.
In an interview with The Street on January 5, the billionaire investor opined that 2023 will not be short of crypto scandals following the numerous fiascos that rocked 2022.
Cuban, who has backed several crypto and Web3 startups, said he believes the next biggest thing to impact the industry will be “the discovery and removal of washout transactions on core exchanges.”
“There are supposedly tens of millions of dollars in transactions and cash for tokens that have very little use,” he said. said before adding: “I don’t see how they can be so liquid.”
Wash trade, which is illegal under US law, is a process where a trader or bot buys and sells the same crypto asset to provide misleading information to the market.
The goal is to artificially inflate volumes so that retail traders jump on the bandwagon and push prices higher. In essence, it is a pump and dump system.
Cuban said it was just a prediction, adding “I have no details to offer to back up my guess.”
According to a December report from the National Bureau of Economic Research (NBER), up to 70% of unregulated exchange volume is fictitious trading.
The researchers used statistical and behavioral models to determine which transactions were legitimate and which were fake.
Moreover, a 2022 to study by Forbes on 157 centralized exchanges found that more than half of Bitcoin’s trading volumes were fake.
Related: Mark Cuban to Bill Maher: “If You Have Gold, You’re Stupid As Shit…Just Get Bitcoin.”
However, wash trading is not limited to centralized exchanges. On Jan. 5, Quantum Economics CEO and former senior market analyst at eToro, Mati Greenspan, said that 42% of all NFT volume is traded offline.
Yeah. We are in 2023 and we are still talking about wash trading. https://t.co/y9kiLbu4Eu
— Mati Greenspan (@MatiGreenspan) January 5, 2023
He added that the fictitious trade is also used to reap tax losses, which makes it appear (to the taxman) that there has been a bigger loss than in reality.