A few weeks ago, Bitwise Asset Management released a report that concluded that as much of 95% of the crypto trades at leading exchanges are fake (see the MIT Technology Review article or the Wall Street Journal article for summaries of the results).
The question I’d like to ask here: why would crypto exchanges want to generate fake 
trades?
- Exchanges want users and investors to think their businesses are booming. None of the exchanges want people to realize that there are far fewer crypto trades going on than the hype would lead you to believe.
- Exchanges want to run up the revenues of miners. Fake transactions (say, one party trading with itself) still count as transactions as far as miners are concerned. Think of unmined crypto as a bank, only there’s no security guard out front. What can miners do to run off with the coin? You got it: fake transactions.
- Exchanges want to support the fiction that cryptos are decentralized, or that decentralization is practical. In reality, crypto wealth is far more concentrated into a few hands than any fiat currency. These handful of crypto-rich want to hide the fact that they hold the keys to the kingdom. The exchanges are only too happy to play along with this fiction.
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