The researchers determined that while regulated exchanges were free of wash trades, fake trades were rampant on the unregulated ones. (The researchers deemed an exchange “regulated” if it had a digital trading “BitLicense” from the State of New York, and “unregulated” if it did not.) The results of the analysis suggested that in many cases, buyers and sellers in transactions on unregulated exchanges were actually the same person or organization attempting to artificially boost trading volume and therefore brand awareness for the exchange. That, in turn, can pump up the value of a particular currency, as traders jump on the bandwagon and place legitimate trades themselves. The study highlighted the risks of trading on unregulated cryptocurrency exchanges, and came on the heels of the collapse and bankruptcy of FTX, a major crypto exchange, which, like the unregulated exchanges studied in the paper, did not have a BitLicense.
