Wash trading has recently emerged as a key concern in cryptocurrency market integrity. It involves artificially inflating trading volume by repeatedly buying and selling the same asset, creating a misleading perception of demand. In its latest report, Chainalysis estimates that wash trading on select blockchains accounted for up to $2.57 billion in trading volume in 2024.
The report also revealed that 4.52 percent of all launched tokens in 2024 displayed patterns that may be linked to pump-and-dump schemes. Pump-and-dump schemes lure unsuspecting investors by driving up the price of an asset, often through coordinated hype, only for insiders to sell off their holdings at a peak, leaving unwitting holders of the asset with significant losses.
Buy and sell transactions hit $704 million
Wash trading volume on Ethereum, BNB Smart Chain (BNB) and Base using matched buy and sell across transactions was around $704 million in 2024. To put this into perspective, the suspected wash trading volume across those transactions accounted for 0.035 percent of the total DEX trade volume in November 2024.
Although suspected wash trading volumes fluctuated throughout the year, the number of DEX pools with associated activity remained fairly consistent, averaging around 1,000 to 1,800 pools per month, or between 0.2 and 0.3 percent of the approximately 500,000 pools active monthly, suggesting that wash trading may be concentrated in specific pools or driven by a small number of actors with targeted efforts.
Disperse-based detection unveils $1.87 billion in wash trading volume
Using disperse-based detection, Chainalysis looked at activity across token multi-senders, which were originally developed to simplify payments by facilitating simultaneous transfers of different tokens to multiple addresses. Unfortunately, many bad actors exploit these services to distribute funds across numerous addresses, managing them algorithmically in an attempt to conceal that the same actor is potentially manipulating tokens.
Using this strategy, combined wash trading volume on Ethereum, BNB, and Base was around $1.87 billion in 2024. In November 2024, the suggested wash trade volume accounted for 0.046 percent of total DEX volume.
Similar to the first approach, the spikes observed between March 2024 and April 2024 coincide with the activity of 2024’s most prominent operators. For instance, in April, three controller addresses alone accounted for $318 million in suspected wash trading volume.
In 2024, the average suspected wash trade volume for one controller address was around $3.66 million in 2024. Meanwhile, the maximum volume of suspected wash trading controlled by one address can reach the hundreds of millions of dollars, illustrating the potential scale of this inflated activity.
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Prevention of manipulative activities requires coordinated approach
Market manipulation remains a critical concern for both crypto industry participants and authorities as they seek to keep pace with the rapidly-evolving sector. The complex and dynamic nature of market manipulation, compounded by crypto’s unique characteristics heightens the challenge.
Therefore, a robust and coordinated approach is essential, one that fully harnesses the power of on-chain data and analytics to enable proactive detection and prevention of manipulative activities.
