Wash sale trading is one of the most notorious market manipulation techniques. Manipulators exaggerate the trading of digital assets by repeatedly buying and selling the same asset to create the illusion of high trading volume. In this way, investors are misled into believing that the asset is highly liquid or valuable.

In 2019, Bitwise Asset Management reported [ 1 ] that about 95% of Bitcoin trading volume on unregulated exchanges was faked through wash sale transactions. The figure suggests that a large portion of trading activity in digital assets may be driven by market manipulation rather than real market demand.

Market manipulation through wash sale trading poses a significant threat to the integrity of digital asset markets. The high percentage of fake trading volume reported by Bitwise Asset Management raises concerns about the reliability of data and the potential impact on investor decisions. In such a scenario, ensuring transparency and regulatory oversight is crucial to protect investors and maintain trust in the market.