Billionaire Mark Cuban recently shared his thoughts on what could lead to the next crypto implosion: wash trading.
During a new interview with TheStreet, Cuban – who is also a well-known cryptocurrency investor – does not stop that 2023 will also be a year marked by scandals and frauds that will destroy the digital currency industry.
In fact, the business mogul says it’s not a question of whether or not this will happen, but when another crippling market event will occur. This time, centralized exchanges will unfortunately be in the spotlight of “wash trading.”
Mark Cuban: Image: Bloomberg|Getty Images
The owner of the NBA team Dallas Mavericks said:
“I think the next possible implosion is the discovery and removal of wash trades on centralized exchanges. There should be tens of millions of dollars in trade and liquidity for tokens that have very little use. I don’t see how they can be liquid like that.
How to Trade Wash?
Classified as a type of pump-and-dump scheme, wash trading involves creating “artificial interest” in financial assets such as cryptocurrency.
During this process, traders will lead the public to believe that there is a high demand for a certain digital token by using the power of social media after deliberately buying and selling large amounts of that particular crypto currency.
According to the Commodity Futures Trading Commission, this type illegal practice allowing those behind them to complete transactions risk-free and without changing their market position.
Cuban believes that this kind of scheme will lead to the next implosion of the crypto market, although the billionaire admits that at this point, he has no real evidence to support his thesis.
2022 Destructive For Crypto
In May 2022, the cryptocurrency market, still reeling from the disruption of most crypto assets including Bitcoin, lost billions after Luna and UST (TerraUSD) collapsed.
This event caused a chain reaction that put companies such as Three Arrows Capital (3AC) in a position where they could not meet the obligations of Voyager Digital and Celsius Network, two crypto lenders.
As a result, 3AC was dissolved and both creditors were left with no choice but to file for Chapter 11 Bankruptcy – the same fate as the crypto exchange FTX in November last year.
Crypto total market cap at $783 billion on the weekend chart | Chart: TradingView.com
The development sent shockwaves through the broader crypto market causing many digital assets to experience severe price dumps. Many digital currencies have yet to recover from the losses they incurred after the incident.
Meanwhile, efforts by bitcoin exchanges to expand trading volumes through wash trades have been a major cause for some time.
The Securities and Exchange Commission has banned wash trades as a manipulative tactic, and regulators around the world are increasingly cracking down on wash trades involving cryptocurrencies.
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