Cryptocurrency trading statistics present an alarming picture

It’s no secret that laundry trading continues to roil the cryptocurrency market. An article titled “Cryptocurrency Trading,” published by the National Bureau of Economic Research (NBER), found that a huge number of unregulated cryptocurrency exchanges accounted for a significant portion of laundering deals.

The non-profit research organization studied 29 major exchanges, such as Binance, Coinbase, and Huobi, as well as lesser-known exchanges from July 9 to November 3, 2019.

Wash cryptocurrency trading

Based on third-party website rankings, representation, and API compatibility, cryptocurrency exchanges are ranked in Level 1 (ranked in the top 700 in the Finance/Investment section of a similar site) and Level 2 (all ranked outside of the top 960) trading studied. In crypto assets, such as Bitcoin, Ethereum, Litecoin, and XRP.

The authors took several approaches to discover instances of laundered trading that were not likely to be influenced by “the strategies of scattered traders, the characteristics of the exchange, or the specific characteristics of the asset class”.

It found that laundry trades accounted for 77.5% of the total trading volume on unregulated exchanges, with an average of 79.1%. Meanwhile, it was noted that laundered trades on the 12 Tier 2 exchanges accounted for more than 80% of the total trading volume, “which is still above 70% after accounting for the observed variance in the exchange.”

The newspaper said:

“Our first finding is that laundry trading is largely present on unregulated exchanges but absent on regulated exchanges,” they wrote. “We consistently find anomalous trading patterns only on unregulated exchanges, with Tier 1 exchanges failing more than 20% of tests and Tier 2 exchanges failing more than 60%.”

Alarming numbers

The study found that laundered trading on cryptocurrency exchanges is positively correlated with the prices of crypto assets in the short term.

In addition, money laundering occurs less on platforms with “longer founding histories and larger user bases”. Conversely, less popular exchanges have short-term incentives to launder money without attracting scrutiny.

“While existing business incentives and rating regimes lead to outbreaks of flash trading on unregulated exchanges, regulated exchanges, having committed significant resources to compliance and obtaining licenses and facing severe penalties for market manipulation, do little to trade.”

In the first quarter of 2020 alone, the NEBR study recorded $4.5 trillion in laundry trades in the spot markets, while the same for the derivatives market amounted to $1.5 trillion.

Cryptocurrency exchange trading stats after a disturbing image first appeared on CryptoPotato.

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