$2b of crypto assets wash traded on decentralized exchanges, report shows

Solidus Labs research finds $2 billion in deceptive wash trading activities across Ethereum-based decentralized exchanges. 

Newly released data from Solidus Labs, a crypto trade surveillance and risk monitoring platform, indicates that a staggering $2 billion worth of crypto assets has been wash-traded on Ethereum-based decentralized exchanges (DEXs) since 2020.

The report casts a spotlight on the pervasive but preventable issue of market manipulation in the world of decentralized finance (defi).

Tracing the pattern: Wash trades and manipulated crypto pools

Wash trade is a malicious tactic where traders place both buy and sell orders with themselves to artificially influence the market. Of roughly 30,000 DEX liquidity pools studied, Solidus Labs identified a striking 67% where wash trading had been conducted. In these manipulated pools, wash trading comprised 16% of the total trade volume. 

Solidus Labs found that a network of related wallets artificially inflated the token’s value, luring unsuspecting investors before suddenly pulling the plug, netting a profit of over $2 million.

The findings of the report are especially concerning given the growing prominence of defi, which often operates in less regulated spaces than traditional financial markets.