What is laundry trade? Mark Cuban predicts it will “implode” the crypto sector

After the crypto sector hit the bottom of the entire trading sector in 2022, investors stepped into 2023 with hopes of improving market sentiment. Billionaire crypto backer Mark Cuban has predicted that 2023 will have its own share of scandals. The illegal practice of the laundry trade, Cuban has predicted, will trigger further financial problems for the already volatile and scrutinized industry. The American business tycoon has warned all centralized exchanges to start devising strategies to identify and report wash traders.

What is crypto asset wash trading?

When a group of traders or bots intentionally buy and sell the same crypto asset to increase its price, this process is known as wash trading. This is often how a broker and a trader come together to make a profit after injecting orchestrated misinformation into the market.

The crypto-asset’s prices could stay up until such time as the Wash traders partner with them, but soon after they cease trading, the asset’s price may fall — exposing other unsuspecting investors to financial risk.

Not only in the crypto area, wash trading also poses dangers for investors in other assets such as stocks.

The US has made the laundry trade an illegal and punishable offense.

Typically, wash traders use centralized exchanges to conduct their actions. Some of the popular centralized exchanges include binance, coin base, octopusand KuCoin among other.

In March 2021, Coinbase agreed to deposit US$6.5 million (approximately Rs.5.3 billion) to settle claims that its former employee laundered Bitcoin and Litecoin. The claim was made by the Commodity Futures Trading Commission (CFTC), which also allegedly claimed Coinbase reported inaccurate information about trading on its platform.

In 2022, a Forbes report analyzed trading activity on 157 centralized exchanges and found that over fifty percent of all bitcoin trade volume that surfaced was fake.