Liquidity Jump, Liquidity Diffusion, and Crypto Wash Trading

Qi Deng and Zhong-Guo Zhou

Papers from arXiv.org

Abstract: We propose that a portion of short-term price jumps in crypto assets results from liquidity fluctuations induced by wash trading. We develop a model decomposing liquidity into two components: liquidity jump (size of fluctuation) and liquidity diffusion (probability of fluctuation). High values for both liquidity measures indicate wash trading, while high liquidity jump with low liquidity diffusion suggests legitimate high-demand trading. Together, these liquidity measures enable detection of wash trades and help market participants understand liquidity dynamics, and make informed decisions in crypto trading.

Date: 2024-10, Revised 2025-03
New Economics Papers: this item is included in nep-mst and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2411.05803 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2411.05803

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().