Wash Trading

Wash trading, an illegal form of trading in most jurisdictions, is a form of trading where a market participant sells a specific amount of an asset they hold, such as stocks, bonds, or cryptocurrency assets, and simultaneously or shortly thereafter reacquires the same asset by purchasing back the same amount (or a very close amount to the original amount).

This is called wash trading, as it ‘washes’ the old assets through the market by disposing of those held for a period of time and reacquiring new assets freshly purchased. Wash trading is performed by market participants to achieve several objectives, including tax evasion and artificially increasing trading volumes.