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Daily Liquidity Jump and Diffusion, and Treatment on Crypto Wash Trading

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  • Qi Deng
  • Zhong-Guo Zhou

Abstract

Wash trading among crypto assets induces short-term price jumps, which manifest as liquidity fluctuation. We develop a model to decompose asset liquidity into two components: liquidity jump and liquidity diffusion, which quantify the size and probability of wash trading. Using the trading data from US stock markets as a benchmark, we establish that the combination of high liquidity diffusion and high liquidity jump indicates wash trading. On the other hand, the majority of large-volume trades with high liquidity jump but low liquidity diffusion (

Suggested Citation

  • Qi Deng & Zhong-Guo Zhou, 2024. "Daily Liquidity Jump and Diffusion, and Treatment on Crypto Wash Trading," Papers 2411.05803, arXiv.org.
    • Handle: RePEc:arx:papers:2411.05803
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    References listed on IDEAS

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