Crypto Exchange Bithumb Accused of Allowing 'Wash Trading' of Over $250 Million in Fake Volume

Bithumb, a South Korean cryptocurrency exchange, is allegedly being exploited by a sophisticated group of traders who have created a fake trading volume to the tune of $250 million-plus a day on the exchange's order books.

On Sept. 2, Alex Krüger, a crypto trader, pointed out suspicious activities on Bithumb's order books and linked the proceedings to a newly launched promotional offer.

1/ There currently are USD 250 million of fake volume traded at Korean crypto exchange Bithumb, every day at 11AM Korean Time, since August/25.

While such a technique is banned in most traditional stock exchanges-some countries list Wash Trading as a financial crime-the wild west world of cryptocurrencies sees the method running aplenty, and possibly even causing retail investors substantial losses due to false information.

To prove his point, Krüger provided a calculation of an estimate fake volume on Bithumb every day:.3/ Trading fees are 0.15% taker.

Wash trading conducted by entering two opposite limit orders => Total fees 0.3%. Rebate is for 120% => 0.36%. To collect the full KRW 1 billion rebate a wash trader must thus trade KRW 278 billion.

Krüger pointed out the huge volume should not be mistaken for "Bullish" trading activity, which could lead investors to jump on volume-based indicators to place trades and eventually face losses.

Wash Trading remains endemic in the cryptocurrency sector.

A lack of trading regulations, watchdogs and unified crypto-exchange consortiums means traders get away with the most questionable offenses.

No clear evidence of Wash Trading, price manipulations and fake order books exist in crypto trading yet, but if regulations do come to play soon, most exchanges are in for a less-than-spectacular ride.