- documents de travail
Using data leaked by hackers from a major Bitcoin exchange, we find that more than 2% and up to 33% of all transactions are wash trades, a type of market manipulation in which traders clear their own limit orders to “cook” transaction records. Our finding provides direct evidence for the widely-suspected “fake volume” allegation against cryptocurrency exchanges, which are so far only backed by indirect inferences. While wash trades do not incur a significant positive impact on Bitcoin prices, they do increase transaction fees collected by the exchange. Wash trades also involve exchange insiders previously exposed in other price manipulations. The evidence is consistent with the hypothesis that the exchange commits wash trading itself – not to manipulate price but to inflate apparent trading volume so as to look more attractive to deceived customers and boost commission revenues. We further use our direct evidence to evaluate the indirect inference techniques proposed in the literature.