There’s some weirdness going on with the methodology. I’m ignorant in the subject but is this normal? A quote from the article: “If a firm shows a commitment to transparency by conducting token proofs of reserve or by participating in Forbes crypto exchange surveys, it qualifies for a “transparency credit” that lowers any discount that may otherwise apply.”
Many criticisms of cryptocurrency of the form, "...has x fraudulent facet..." also apply to traditional finance. What is being called "wash trading" in this article is called "algorithmic trading" on traditional asset exchanges, and is considered fair game/a bit funny (especially prior to the Jan 2022 decision to decimate all retirement portfolio growth due to QE).
The way this is dealt with on traditional markets is to simply draw a line on what trading is reported for mark-to-market (i.e., bids and asks for under 100 shares don't appear in the quote tick data). Other reactive measures such as circuit breakers like those bumped up against in March 2020 established due to the 2010 "flash crash" have also been put in place in traditional markets.
Forbes establishes a "proprietary" methodology to weight and attempt to sieve "real volume," which I can't agree or disagree with since it is opaque with regards to the precise implementation. Given the nature of their findings, I would call the title editorialized.
You cannot wash trade algorithmically any more than you could do by hand (as a matter of fact, virtually all exchanges have self trade prevention that will cancel your netting orders), and exchanges publish full book depth of market data, even IEX these days - the roundlot thing you allude to is a regulatory constructor from Reg NMS for protected quotes.
Yeah - it’s rather annoying how they lump in ‘non-economic activity’ with ‘wash-trading’. HFT is totally legitimate way of doing business, the liquidity is provides ‘may’ be good for markets and shouldn’t be lumped in with wash trading as “fraudulent” without any real analysis to back it up.
Seems to be a simple ontological distinction in a case of a broken metaphor - and thus a huge warning against misapplying metaphors. "You wouldn't download a car"...
Let's look at fiat: I can "trade" my $10 bill to a friend for 10 $1 billls, but that act is precisely "making change" - is this economic trade, though?
There's an even more accurate analog we see with Bitcoin: receiving cash (i.e., as change from a transation) and stuffing it in your pocket - then only later putting it in your wallet, or bank, or vault, or a tray in your house. There was only one transaction, and the rest of the money movement wasn't "trade" at all. If the ownership doesn't change, it's just a movement of money.
Calling the movement a trade is a wild guess and about as honest as insisting that the only way I can pull change out of my pocket is with a new transaction, even were I just putting it in my wallet.