Especially in view of this research finding from NewScientist (4 December 2021, paywall):
As many as seven in 10 cryptocurrency trades on the world’s most popular but unregulated exchanges may be people buying from themselves to artificially inflate prices, according to a new analysis.
A study of 29 cryptocurrency exchanges, where people buy and sell the virtual currencies, undertaken between July and November 2019 has found significant volumes of “wash trading” within cryptocurrencies. Wash trading is where an investor sells and buys the same asset to create artificial interest in an investment, often distorting the price.
The analysis looked at how four of the most popular cryptocurrencies – bitcoin, Ethereum, Litecoin and Ripple – were traded on the exchanges. On the exchanges that are regulated, the researchers found little evidence of wash trading. However, on those that were unregulated, they found that wash trading is likely to be widespread.
That distortion makes forecasts of future value of these forms of cryptocurrencies more or less impossible in my book. It also suggests the unscrupulous are attracted to the unregulated nature of cryptocurrencies, the lack of governmental overview that appears to be a design characteristic of these digital artifacts.
Buyer beware.
