Wash Trade Dominates Bitcoin Volume, What Does This Mean for Price?

The daily bitcoin trading volumes come out in the billions of dollars every day, with hundreds of thousands of daily transactions being carried out. It is one of the reasons why bitcoin attracts the most investors, given such high trading volume and good depth across all exchanges. However, some chain analyzers have delved into the blockchain to explore daily BTC volume, and the findings from this study have been alarming.

More than 50% false volume

For the most part, in the current market, there is always a certain amount of volume for digital assets that are actually fake. These fake trading volumes are supposed to make a digital asset look better than it actually does in order to get other investors to put money into them. Smaller-cap altcoins are usually guilty of this to a large extent, but it seems that the largest cryptocurrency by market cap is not left out of this.

Bankless Times conducted a survey of the daily bitcoin volume for the year 2022 and found that the majority of the volume was actually fake. The study showed that 51% of bitcoin volume across various exchanges was actually the result of wash trading.

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

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

The study revealed that stablecoins actually contributed greatly to this wash trade volume. This means the digital asset is seeing up to $10-15 billion in fake volume across exchanges, raising concerns about how this is affecting the cryptocurrency.

Impact on Bitcoin Price

To the unsuspecting eye, there may not be any manipulation going on when it comes to the price of bitcoin, but this report from the Bankless Times actually shows that the digital asset is being heavily manipulated. Wash trading can easily influence the price of a digital asset by making it look like a profitable investment.

So say bitcoin is laundered traded across multiple exchanges; it tricks investors into thinking there is high demand for the asset, leading them to buy it. Thereby raising the digital asset to cryptocurrency in the process.

With such a large volume of trading volume being allegedly fake, it begs the question of whether the current BTC price is actually accurate. An actual volume of less than 50% of reported volumes would put the digital asset’s value at around $12,000, if true.

Featured image from Forbes, chart from TradingView.com

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