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What is wash trading?
Wash trading is buying and selling the same asset with yourself, or with a partner, to create the appearance of trading without any real change in ownership or risk. It inflates reported volume and can make an asset or exchange look more popular and liquid than it is.
What it means for you
Volume figures can be faked, so high volume alone does not show you could sell a large amount at the quoted price. A peer-reviewed study found wash trading made up most of the reported volume on the unregulated crypto exchanges it examined. Order book depth and the spread say more about whether you can sell than headline volume does.
A common mistake: “High trading volume means a coin is easy to sell.”
In fact: Volume can be fabricated by wash trading. Whether you can sell depends on real buy orders near the price, which the order book and the spread show.
How it works
The CFTC defines wash trading as entering into, or purporting to enter into, transactions that give the appearance of purchases and sales without incurring market risk or changing the trader's market position. In the US, the Commodity Exchange Act prohibits it. Researchers detected fake crypto volume using statistical fingerprints of genuine trading: the distribution of first digits in trade sizes, clustering at round sizes, and the shape of the tail of trade sizes. On unregulated exchanges those patterns broke down, and the fabricated volume improved exchange rankings and temporarily distorted prices.
Sources: CFTC Glossary, Cong, Li, Tang and Yang: Crypto Wash Trading (arXiv) · checked 4 October 2026
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Educational content, not financial advice. Written by hand and checked against the source named above. Something wrong? Tell us and we reply within two business days.