Since 2020, wash trading of cryptocurrencies worth at least $2 billion has been reported on Ethereum-based decentralised exchanges (DEXs), according to Solidus Labs, a pioneer in crypto-native transaction surveillance and risk management. This information is contained in the most recent Crypto Market Manipulation Report from Solidus Labs.
According to the report, which examined almost 30,000 DEX liquidity pools, wash traders were involved in 67% of the pools. These traders frequently engage in open or covert self-trades with the intention of manipulating the pricing or trading activity of crypto tokens. In the manipulated pools, wash trading accounted for 16% of all trading activity. This number represents a cautious estimate of the actual volume of wash trading on the DEX given the sample size.
“Market manipulation remains a significant challenge within the crypto industry, especially in a time of greater regulatory scrutiny and institutional adoption,” said Asaf Meir, founder and CEO of Solidus Labs, in response to the findings. In order for the crypto and DeFi industries to prosper, he further emphasised the necessity to stop such practises.
The second paper in Solidus’ series on cryptocurrency market manipulation provides specific information and examples of the main wash trading strategies used by bad actors. In one instance, “SHIBAFARM,” a meme coin, was traded manipulatively thanks to a coordinated network of wallets. This organisation lured investors, changed the price, and then tricked those investors out of more than $2 million.
While wash trading is addressed by systems in traditional markets, it is still unclear how to detect and prevent it on DEXs. Solidus Labs has proactively created tools to recognise and combat market manipulation in response to this challenge. Their products, such as Token Sniffer and DEX-based A-A Wash Trading Detection, are gaining popularity with investors, regulators, and crypto exchanges.
According to Blockchain, Solidus Labs is renowned for their monitoring software.On August 10, 2023, Solidus Labs disclosed a strategic alliance with EDX Markets. The HALO technology from Solidus Labs will be integrated by EDX Markets, a well-known cryptocurrency exchange backed by significant Wall Street companies, to improve transaction monitoring.
This partnership supports Solidus Labs’ goal of ensuring secure cryptocurrency trading on both centralised and DeFi markets. Solidus Labs’ founder and CEO, Asaf Meir, took pride in supporting EDX’s mission and emphasised the value of using crypto-native risk mitigation solutions to bridge traditional and digital banking. The collaboration intends to raise the bar for trustworthy and integrity-driven crypto trading.