According to billionaire Dallas Mavericks owner and crypto investor Mark Cuban, the next crypto “implosion” will be brought on by crypto token wash trade on centralized exchanges.
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 detection and elimination of wash trades on central exchanges, according to Cuban, who has invested in a number of Web3 and cryptocurrency firms, will have the most influence on the sector moving forward.
“There are supposedly tens of millions of dollars in trades and liquidity for tokens that have very little utilization,” he said before adding, “I don’t see how they can be that liquid.”
In order to provide false information to the market, a trader or automated program engages in wash trading, which is prohibited under U.S. law.
The intention is to artificially exaggerate volumes in order to encourage retail traders to join the trend and raise prices. It’s basically a pump-and-dump strategy.
Cuban said it was just a prediction, adding “I don’t have any specifics to offer to support my guess.”
According to a December report by the National Bureau of Economic Research, wash trading accounts for up to 70% of the volume 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 a former senior market analyst for eToro, 42% of all NFT volume is wash traded as of January 5.
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