Suspected wash trading on blockchains reaches $2.57 billion in trading volume by 2024

The issue of wash trading has become a significant worry in maintaining the integrity of the cryptocurrency market. This deceptive practice involves artificially inflating trading volume by repeatedly buying and selling the same asset, giving the illusion of high demand. According to the latest report by Chainalysis, wash trading on specific blockchains could amount to as much as $2.57 billion in trading volume by 2024.

The report also uncovered that around 4.52 percent of all tokens launched in 2024 exhibited patterns that could be associated with pump-and-dump schemes. These schemes involve manipulating asset prices to attract unsuspecting investors, only for insiders to sell off their holdings at a profit, leaving investors with severe losses.

In 2024, transactions involving buying and selling reached an estimated $704 million in wash trading volume across Ethereum, BNB Smart Chain, and Base. Despite fluctuations in suspected wash trading volumes throughout the year, the number of DEX pools engaged in such activities remained relatively stable, indicating a concentration of wash trading in specific pools or orchestrated by a limited number of actors.

Chainalysis employed a disperse-based detection method to uncover approximately $1.87 billion in wash trading volume across Ethereum, BNB, and Base in 2024. This method involved examining activity across token multi-senders, which are often exploited by bad actors to distribute funds across various addresses to obfuscate manipulative actions. The detected wash trading volume in November 2024 accounted for 0.046 percent of total DEX volume.

Notable spikes in suspected wash trading volume between March and April 2024 corresponded with the activities of some of the key players that year. For instance, in April, three controller addresses alone were linked to $318 million in suspected wash trading volume. The average suspected wash trading volume controlled by one address was approximately $3.66 million in 2024, with some addresses overseeing wash trading activities worth hundreds of millions of dollars, underscoring the significant scale of this fraudulent behavior.

As market manipulation remains a pressing issue for industry participants and regulators, a united and robust effort is crucial to combating such activities effectively. Utilizing on-chain data and analytics can enhance early detection and prevention of manipulative behaviors, ensuring the market’s integrity is preserved amidst the rapidly evolving cryptocurrency landscape.