The Next Crypto “Implosion”

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By Degen Lipsa

The next crypto “implosion,” according to billionaire Dallas Mavericks owner and crypto investor Mark Cuban, will be brought on by crypto wash trading on centralized exchanges.

Mark cuban: an American billionaire entrepreneur

Wash trading is the practice of buying and selling securities with the sole intent of providing the market with false information.
Wash trades can be carried out by traders and brokers operating in concert in specific circumstances, or they can be carried out by investors who are simultaneously the buyer and the seller of the security.

Wash trading deceives investors into thinking that a security’s trading volumes are higher than they actually are, which may increase the security’s legal trading activity. Wash trading is against the law in the United States, and the Internal Revenue Service (IRS) forbids taxpayers from deducting wash trade losses from their taxable income.

The billionaire investor predicted that 2023 would be full of cryptocurrency controversies like the multiple scandals that rocked 2022 in an interview with The Street on January 5.

The next major development in the business, according to Cuban, who has invested in multiple Web3 and cryptocurrency startups, will be “the identification and eradication of wash trades on central exchanges.”

He said that tokens with low usage have tens of millions of dollars’ worth of trades and liquidity, but he continued, “I don’t see how they can be that liquid.” Cuban clarified that he was merely speculating and said, “I don’t have any specifics to present to substantiate my estimate.”

According to a December National Bureau of Economic Research analysis, wash trading accounts for as much as 70% of the traffic on unregulated exchanges (NBER). To distinguish between real and fraudulent transactions, researchers examined statistical and behavioral indicators. Furthermore, more than half of the Bitcoin trading volumes were false, according to a 2022 Forbes analysis on 157 controlled exchanges.

However, wash trading is not solely restricted to centralized exchanges. According to Mati Greenspan, CEO of Quantum Economics and former senior market analyst for eToro, 42% of all NFT volume is wash traded as of January 5. He continued, “Wash trading is also utilized to harvest tax losses, giving the appearance (to the taxman) of a greater loss than there actually has been.”

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