Wash Trade

A wash trade in crypto refers to a deceptive practice where a trader simultaneously buys and sells the same asset to create the illusion of market activity without actually changing ownership or price. This tactic is often employed to manipulate trading volumes, deceive investors, or inflate prices artificially.

Example: Trader A owns 100 units of a cryptocurrency and wants to boost its trading volume. They create two separate accounts, one to buy and the other to sell the cryptocurrency at the same price. This creates fake trading activity without affecting the overall market, giving the impression of high demand.

Case: In 2019, the U.S. Commodity Futures Trading Commission (CFTC) charged two individuals and their company with running a fraudulent scheme involving wash trades in Bitcoin futures contracts. They allegedly executed thousands of wash trades to create a false appearance of market interest and attract more customers to their platform.