The concept of wash trading originated in the stock exchange but applies to cryptocurrency trading as well. It is the misleading (and, in the U.S., illegal) practice of buying or selling a security, or a cryptocurrency, with the intention of creating artificial activity in the market.
To trick other investors into thinking trading activity is rising, a wash trader sells at a loss and then buys the asset right back. Although there is no actual trade of value in such transactions, this practice creates the impression that there is an increase in trading volume.
Some cryptocurrency exchanges have been known or suspected to be involved in wash trading for the purpose of inflating their trade volumes.
Wash trading in the cryptosphere remains a legally grey area.
