Bitwise recently shared a report which put light on one of the severe issues prevailing in the crypto market, which is of wash trading. One senior executive of a known cryptocurrency exchange OKEx now has admitted to that his exchange has an issue of inflated volumes.
When the OKEx’ Director of Financial Market was asked about the exchange’s involvement in wash trading, he said that the exchange would acknowledge the issue. But he also cleared that it was a decision taken considering the market behavior of that time and was based on the fee structure on which the exchange worked.
He further said that “I would say there is a lot of suspicious trade activity on OKEx,” explained Lai. “And we’re working on a lot of measures to prevent that stuff.” When asked if the exchange was directly connected to this issue, he said it was not. The exchange has an eight-tier fee structure which enables it to charge lower transaction fees to the accounts which are involved in frequent trading activities in spot and futures category.
He also cleared that wash trading helped clients to trade at the lower fees. Building volume takes time, and one of the fastest ways to do that (for a few Chinese traders at least) is to wash trade liquid pairs. Once the 8th tier volume is reached, they can trade at a low price. He said that his exchange tried its best to avoid it. It implemented stricter KYC policies, but only in the case of withdrawals.
Whenever any exchange closes the user’s account for unfulfilled KYC or fraudulent activity, the client can make a new account and continue the activity. The Bitwise report said that 95% of the traded crypto volume was fake and artificially created.
Though OKEx might be the first exchange to acknowledge this issue publicly, it is not the only exchange involved in such activities. The crypto market is full of a loophole, and there are many exchanges present in the market which leverage on these loopholes.