Wash Trading: Fake It Till You Make It
Fake it till you make it, we hear that a lot and it is supposed to feel motivational, but in some certain ways it is deceitful. Well depending on how it is being used, if it is being used for the better without hurting anyone then it is okay, but when it is used to hurt people then it is wrong. For instance, when a club is just newly opens and wants to give the impression that they are fully booked and busy, they might hire actors to come to the club to come party, giving outsiders the impression that it is always booked and busy, this will catch other people’s attention and in no time the club will get flooded by real customers. Its a marketing strategy that hurts nobody, quite deceitful but doesn’t hurt anyone.
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In crypto we see similar thing happen everyday but most times we don’t know it is happening, it is called wash trading in crypto. When crypto devs or people trade their own assets by theirselves to give it false trading volume or false value. In crypto exchanges, coins get traded by the crypto exchanges owners to create fake trading volume, because a lot of people consider checking crypto exchange trading volume before trading with them. These exchange will use their own money to trade in their exchange giving a false trading volume, sometimes exchanges trade across theirselves to generate fake trading volume. This can be consider a little deceitful and also not so deceitful because it is not just different from the club owner who did the same. But then it is very deceitful if they do the and customers trade and their money get stuck because they are illiquid to pay their customers. This is very bad, they have successfully faked it and deceived their customers into stealing their money or whatever reasons they give for not being able to pay their customers.
In the NFT space, we see a lot of wash trading, these happened during the NFT peak era, where we started seeing the value of NFTs peak at a very high price, we were seeing the value of NFTs at extremely unbelievable price which was obviously outrageous. Well, some of them were being wash traded, the owners of these NFTs will use a different wallet and purchase these NFTs at extremely high prices giving a false impression that people value the NFT and are buying them at that price. Lots of people bought into the idea and bought those NFTs at high prices, some people didn’t sell because they were greedy, but at the of the day, they are left with NFTs that no one is interested in buying at outrageous price.
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