A crypto surveillance firm says billions of dollars in fake market volume are flowing through decentralized exchanges (DEXs) on Ethereum (ETH).
In a new report, Solidus Labs say Crypto token developers and liquidity providers have traded at least $2 billion worth of crypto assets on Ethereum-based DEXs since 2020.
Wash trading involves entities that buy and sell an asset from themselves at the same price in order to artificially inflate trading volume and attract more investment and liquidity
According to Solidus, 67% of the approximately 30,000 DEX liquidity pools it analyzed were manipulated by wash traders. Wash trading also represents 16% of the total trading volume in the manipulated pools, which the company says is a lower limit given the size of the sample examined.
“In DeFi, the fragmentation of liquidity across different DEXes creates smaller markets that are more susceptible to price and volume manipulation.”
The report says that a group of connected wallets have been trading the meme token ShibaFarm to attract speculators. The wax traders eventually attracted the investors and made a profit of more than $2 million.
Solidus Labs founder and CEO Asaf Meir says it is important to address wash trading in crypto amid growing institutional interest and increased scrutiny from regulators.
“The wash trading activity we uncovered here is a clear sign of market manipulation, and it must be prevented before crypto and DeFi can flourish.”
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Featured image: Shutterstock/Sergey Nivens/Vladimir Sazonov
