The volume of wash trading in DeFi has surged in early 2024, causing experts to express concerns about market manipulation. This report examines the key factors and detection methods relevant to these activities.
Analysis of Wash Trading in 2024
According to Chainalysis data, the wash trading volume rose from $20 million in January to $150 million in April 2024. Subsequently, the volume stabilized around $50-60 million from August to December 2024. Key factors contributing to this increase include tendencies for manipulating market rankings and incentive activities.
Detection Methods for Market Manipulation
Heuristic methods are employed to detect manipulation in blockchain markets by identifying fake transactions that do not change asset ownership. These methods rely on behavioral signals such as repeated overlapping trading patterns and abnormal liquidity. Despite their limitations, such methods help analyze additional data, making them useful for determining manipulation frequency.
Manipulation Risks in the DeFi Ecosystem
The rise in wash trading volume and the emergence of tokens associated with suspicious schemes, such as pump-and-dump, underline the threat to the integrity of the DeFi ecosystem. In 2024, the share of tokens linked to such schemes reached 3.8% of all newly launched tokens. This signifies ongoing exploitation of the vulnerabilities in blockchain markets by malicious actors.
The growing volume of wash trading in DeFi poses a threat to the trust in blockchain technologies. Protective measures such as improved monitoring methods and stricter regulatory frameworks are urgently needed to maintain the resilience of the DeFi ecosystem.
