What is Wash Trading in Cryptocurrency and why people hate it?
Wash trading meaning in cryptocurrency. Wash Trading is a way to create misleading or artificial activity in the market, by buying and selling the same financial instruments simultaneously by an investor. It is a form of manipulation of the market.
Created to artificially increase trade volume just to represent that it is in high demand than it actually is. Generally, created by crypto whales.
Wash trading has been illegal in the United States on Commodity Exchange, but in terms of Cryptocurrency everything is self-dependent and depends on people’s ethics. No regulation till now.
Let us understand What is Wash Trade this way.
For example: Let’s assume a coin valued $0.5 as people who want to buy it set their price to $0.5 and Seller is also selling it at 0.5. Now another guy comes let us call him Wash Trader. Now, he selling some of its coins at $1 from one account and buying the same amount of coin at $1 from another account. He sold some and bought the same. Now, if it is a recognizable amount it reflects on the price of the coin and certainly price will increase. That’s how Wash Trading occurs.