- Mark Cuban believed that wash trading on centralized exchanges will lead to crypto’s next implosion.
- A report by the NBER found that as much as 80% of the trading volume on unregulated exchanges may be fake.
Billionaire investor Mark Cuban has shared his outlook for the crypto industry in 2023. Cuban, who also owns popular NBA team Dallas Mavericks, has warned that the trading volume on centralized exchanges need to be scrutinized, else they may lead to an industry-wide downturn.
It’s a question of when, not if, says Mark Cuban
According to Mark Cuban, 2023 will see its fair share of crypto scandals. For him, it’s a question of when, not if. Cuban believes that the scandal to look out for is the wash trading of crypto tokens that takes place on centralized crypto exchanges.
In an interview with The Street, Cuban said:
“There are supposedly tens of millions of dollars in trades and liquidity for tokens that have very little utilization. I don’t see how they can be that liquid.”
He further added that the discovery and removal of said wash trading will lead to the crypto industry’s next implosion.
Wash trading is when a trader or investor buys and sells the same security within a short window in an effort to mislead other market participants about the price or liquidity of an asset. Within the securities markets, wash trading is illegal, but there are yet to have set regulations within the crypto industry.
Crypto’s wash trading problem
The crypto market is particularly vulnerable to wash trading due to the availability of thousands of tokens. The lack of regulatory clarity only adds to the problem. A report published by the National Bureau of Economic Research found that over 70% of the trading volume on unregulated crypto exchanges are wash trades.
The researchers who worked on the report revealed that in some cases, wash trading made up as much as 80% of the total trading volume. It read:
“These estimates translate into wash trading of over 4.5 trillion USD in spot markets and over 1.5 trillion USD in derivatives markets in the first quarter of 2020 alone.”