Crypto Washtrading. Empirical Evidence and Measures to Reduce Washtrading

Inhaltsverzeichnis (Table of Contents)

• 1 Introduction
• 2 Background information
  • 2.1 The cryptocurrency ecosystem
  • 2.2 Regulation of relevant crypto exchanges
• 3 Data
• 4 Empirical Evidence
  • 4.1 Benford's Law
    • 4.1.1 General
    • 4.1.2 Pearson's Chi-Squared Test for Benford's Distribution
    • 4.1.3 Statistical Results
  • 4.2 Clustering at key psychological numbers
  • 4.3 Volume Spike Analysis
  • 4.4 Discussion of statistical results
• 5 Incentives, Perpetrators and Impact
• 6 Measures to reduce washtrading
• 7 Conclusion
• 8 Outlook on future research
• 9 Bibliography

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This thesis aims to investigate the prevalence of washtrading activities on regulated cryptocurrency exchanges by analyzing historical transaction data using statistical methods such as the Pearson's Chi-squared test. The analysis focuses on identifying deviations from Benford's Law in the distribution of first significant digits, clustering patterns at key round numbers, and correlations in volume spikes across different exchanges.

• The prevalence of washtrading on regulated cryptocurrency exchanges.
• The application of statistical methods, including Benford's Law and volume spike analysis, to detect washtrading.
• The regulatory frameworks surrounding cryptocurrency exchanges and their impact on washtrading activities.
• The incentives, perpetrators, and consequences of washtrading in the cryptocurrency market.
• The potential measures to mitigate washtrading and enhance the integrity of the cryptocurrency ecosystem.

Zusammenfassung der Kapitel (Chapter Summaries)

• Chapter 1: Introduction This chapter provides a brief overview of the cryptocurrency ecosystem, the emergence of cryptocurrency exchanges and brokers, and the rapid growth of the cryptocurrency market. It also introduces the concept of washtrading and its illicit nature, highlighting its impact on market integrity.
• Chapter 2: Background Information This chapter delves into the cryptocurrency ecosystem, discussing the regulatory landscape and its evolution. It also examines the regulatory frameworks surrounding selected regulated cryptocurrency exchanges, including Gemini, Bitstamp, Kraken, and Zaif, outlining their compliance measures.
• Chapter 3: Data This chapter provides details about the data used in the analysis, including the source, time period, and specific parameters examined. It lays out the foundation for the empirical analysis presented in subsequent chapters.
• Chapter 4: Empirical Evidence This chapter presents the statistical analysis of the transaction data, focusing on the application of Benford's Law, clustering at key round numbers, and volume spike analysis. It highlights the findings of the analysis and discusses the observed deviations from expected patterns.
• Chapter 5: Incentives, Perpetrators and Impact This chapter explores the various incentives that motivate individuals and entities to engage in washtrading. It investigates the roles of different actors involved in washtrading and analyzes the impact of these activities on exchange ratings, market manipulation, and illegal schemes such as pump and dumps.
• Chapter 6: Measures to Reduce Washtrading This chapter examines potential measures that can be implemented to reduce washtrading and enhance the integrity of the cryptocurrency ecosystem. It explores strategies to address the incentives for washtrading and strengthen regulatory frameworks.

Schlüsselwörter (Keywords)

This research focuses on washtrading in the cryptocurrency market, utilizing statistical methods like Benford's Law, Pearson's Chi-squared test, and volume spike analysis to detect its prevalence on regulated exchanges. The study examines the regulatory frameworks of prominent exchanges, including Gemini, Bitstamp, Kraken, and Zaif, while also exploring the incentives for washtrading and its potential impact on market manipulation and illegal activities.