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On Crypto Exchanges, the Trades Don’t Always Add Up

Outside the blockchain, transaction data is vulnerable to manipulation.

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Illustration: Oscar Bolton Green for Bloomberg Businessweek
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When Bitcoin hit a 17-month high in late June, the milestone was met with some skepticism. Big jumps in a short period of time can signal that someone is trying to artificially move the market, says John Griffin, a finance professor at University of Texas at Austin. “The extreme volatility suggests that manipulation is rampant.”

While many cryptocurrency transactions occur on public digital ledgers known as blockchains, other trades take place on more than 200 global crypto exchanges. Major exchanges that trade traditional assets, such as stocks, are heavily regulated. Crypto exchanges mostly are not, and investors have no way of knowing whether the trading volume and prices they report reflect real activity or market manipulation.