• Billionaire Mark Cuban recently shared his thoughts about what could possibly cause the next crypto implosion: wash trading.
• Cuban believes that 2023 will be a year marked by scandals and frauds that will ravage the digital currency industry.
• Wash trading involves the creation of “artificial interest” for a financial asset such as a cryptocurrency by buying and selling a large quantity of that particular crypto currency.
Billionaire Mark Cuban recently shared his thoughts on the future of the crypto market, suggesting that the next market implosion may be caused by wash trading. During a recent interview with TheStreet, Cuban – who is also a well-known cryptocurrency investor – argued that the industry is no longer in a position of questioning if such a scenario will take place, but rather when it will happen. He believes that 2023 will be a year marked by scandals and frauds that will ravage the digital currency industry and that centralized exchanges will be at the epicenter of this disaster.
The business mogul said: “I think the next possible implosion is the discovery and removal of wash trades on centralized exchanges. There are supposedly tens of millions of dollars in trades and liquidity for tokens that they have very little utilization. I don’t see how they can be that liquid.”
Wash trading is a type of pump-and-dump scheme that involves the artificial creation of interest for a financial asset such as a cryptocurrency. The process begins with the trader leading the public to believe that there is high demand for a certain digital token by utilizing the power of social media, after having purposely bought and sold a large quantity of that particular cryptocurrency. According to the Commodity Futures Trading Commission, this kind of illegal practice allows those behind it to complete transactions that create an illusion of activity in the market, thus boosting the asset’s price.
The risks associated with wash trading are plentiful, with some of the most significant being market manipulation and investor losses. To further complicate matters, the industry does not have a unified set of regulations to put an end to this kind of illegal activity. Mark Cuban has long been advocating for the establishment of a regulatory framework that would make it more difficult for traders to engage in wash trading and other fraudulent activities.
The Dallas Mavericks owner remains confident that the industry will eventually recover from this potential implosion and that the market will become more mature and resilient. He hopes that the regulators will eventually step in and create a proper framework that will protect investors and ensure the proper functioning of the crypto market. Until then, however, investors should remain aware of the potential risks associated with wash trading and any other fraudulent activities that may be taking place.