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 deceives investors and distorts the true trading volume of digital assets. This unethical practice undermines market integrity and highlights the importance of regulatory oversight in protecting investors from such deceptive tactics.