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With exchanges becoming a focus as the FTX fiasco continues, a new research paper suggested that almost three out of four transactions in unregulated exchanges are fake. 

A working paper titled “Crypto Wash Trading” was recently published by the National Bureau of Economic Research (NBER). Using statistical and behavioral patterns to determine which transactions were legitimate or not, the paper studied 29 unregulated exchanges and came to a conclusion that, on average, more than 70% of the volume within the platforms are wash trades.

The researchers found that some exchanges’ wash trading volume goes as high as 80% of the total trading volume. The researchers wrote that in twelve “tier-2 exchanges,” wash trades amounted to almost 80% of the total trade volume. The researchers wrote:

“These estimates translate into wash trading of over 4.5 trillion USD in spot markets and over 1.5 Trillion USD in derivatives markets in the first quarter of 2020 alone.”

According to the researchers, there are short-term incentives for wash trading. The study suggested that fake transactions often impact the rankings of the exchanges on data and statistics websites like CoinMarketCap. In addition, fake transactions also affect the crypto prices within the exchanges over the short term.

Related: 40% of 40K respondents plan to buy crypto in 2023: Blockchain.com survey

Meanwhile, the FTX debacle continues to gain attention as wallets linked to Alameda Research have shown movements, funneling around $1.7 million in assets through crypto mixers. The movements were observed days after the former FTX CEO Sam Bankman-Fried was released on a $250 million bond.

As the FTX collapse damaged people’s trust in centralized exchanges (CEXs), executives working on CEXs have voiced their sentiments on how they could win back user trust. On Nov. 25, Cointelegraph spoke with various leaders within crypto exchanges and found that many are positive that the industry can still recover post-FTX.