Wash Trade
| Wash trading is a type of market manipulation in which participants create false activity in the marketplace by selling and purchasing the same cryptocurrency at the same time. This activity can artificially inflate the price of a cryptocurrency, giving the impression that there is more demand for the coin than there actually is. Wash trading is generally done by creating two accounts on a exchange - one to buy the cryptocurrency, and one to sell it. The trader then places an order to buy the coin at a low price on one account, and an order to sell the same amount of the coin at a higher price on the other account. When the orders are matched, the trader has effectively sold the coin to themselves at a higher price than they bought it for, making a profit. Wash trading is considered to be a form of market manipulation, as it can give traders an unfair advantage and create artificial price movements. It can also be used to artificially inflate the trading volume of a cryptocurrency, giving the impression that there is more interest in the coin than there actually is. Wash trading is generally frowned upon by regulators, and exchanges often have rules against it. However, it can be difficult to detect, as traders can use multiple accounts and exchanges to wash trade. |
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