Wash trading
Fake trading activity artificially generated to deceive the market.
Beginner-friendly explanation
Wash trading is market manipulation where someone buys and sells an asset to themselves to fake activity. It makes it look like many people are trading, when in fact it's just one person pretending.
Example:
An unknown platform shows huge volume on a crypto. In reality, the same person is buying and selling to themselves to attract others.
Intermediate-level insight
Wash trading is an illegal practice (in regulated markets) that creates fake volume through cross-orders between linked accounts. Goals include: boosting perceived liquidity, short-term price manipulation, inflating an asset’s or platform’s visibility. It is common with some NFTs or unlisted tokens.
Example:
An NFT project boasts record sales volume, but on-chain analysis shows 90% of trades are between the same wallets.
Advanced perspective
Wash trading is a form of algorithmic fraud exploiting weak oversight or opaque platforms. It can involve: synchronized market-making bots, automated buy/sell loops on illiquid pairs, coordination across multiple accounts (sybil attack). This practice distorts market signals (volume, volatility, dominance) and misleads investors, especially in copy trading or asset rankings.
Example:
On a small DEX, a token ranks high in volume. An audit reveals that one script executes 10,000 cross-orders per day, skewing the signals used by copy trading bots.
Psychology & Behavior
wash trading, manipulation, fake volume, distorted market, NFT, fraud, artificial liquidity, algorithm, bot, sybil attack