You've heard about #BTC #washtrading but do you really understand why almost every (other) #cryptocurrency exchange does it? No? Don't fret. Read this #Tweetorial and you'll be sorted()
Imagine you're a new #crypto-exchange, like @DXone_Exchange, but, do not have their upstanding #morals. How do you get new users? Do you pay the army of #socialmedia #influencers to #retweet your tweets? Do you run banner #ads everywhere? NO. That's too expensive.
The above will cost you around $100/sign up received. The actual #CAC (customer acquisition cost) will be even higher since only a fraction of those signing up will deposit money to #trade on your exchange.
Hence, you start #washtrading Here's how it works You setup an account A on an exchange and another account B on the same exchange using different login credentials Then, you use A to place a sell order at a price (usually) above normal and a buy order via B at that price.
What does that achieve? For a lot of #shitcoins, wash trading helps their #founders save face and say - " My #Bitcoin alternative traded worth $200,000,000 on the first day. We are going to the #moon" While the truth is a couple of bots in the background trading tirelessly.
With "professional #market makers" (usually bot #programmers) offering these #marketing services at as low as $3000 per month, it is that more-value-for-your-buck deal for #shitcoin #founders. The underlying #philosophy is - fake it till you make it.
While this philosophy might be somewhat acceptable in bars and pubs, it is very clearly, a crime when ported to the #Finance and #Trading side of things Now, let's look at why #crypto exchanges indulge in wash trading It's all about #BTC, #ETH, #BCH, #LTC, #XRP, #BNB.
#Theoretically, Traders will throng to the #crypto exchange that gives them the cheapest buy rates i.e. sum of trading fees and and #crypto price is the lowest In reality though, traders stick to the one #exchange they like. This is where #washtrading comes in.
How do you really price #BTC ? There's no central Govt like figure to back prices. The crypto exchanges, the @CoinMarketCaps, and even @Google searches act as the #price discovery mechanisms to certain extents.
Thus, if u're an @OKEx/@binance/@Poloniex #fanboi and let's assume that they had #washtrading bots, here's what would happen when you walk in: The prices you'll see are artificially #inflated/#deflated 2 make u buy that #BTC at a price higher/lower than real #market value.
...and that's how #crypto exchanges can profit from your trades and this is why #crypto exchanges have:
1. Very Strong Incentives to #washtrade
2. Very Little #regulatory #oversight
3. Complete control over #complaints as traders cannot go anywhere else to complain
This needs to change. This is why @DXone_Exchange has thrown its hat in the ring. On our platform (http://dxone.com), you don't just see the price on our platform. You see the traded prices on several platforms.