Analysis of Market Manipulation on the Solana Blockchain with a Focus on Wash Trading

Abstract

Wash trading, a market manipulation tactic, involves artificially inflating trading volumes by repeatedly buying and selling the same asset. This practice is prevalent in cryptocurrency markets, where it can boost asset visibility and influence prices. On Solana, a high-performance blockchain known for low fees and fast transactions, wash trading detection is particularly complex. Unlike Ethereum, Solana’s ecosystem, dominated by order-book exchanges, lacks well-defined frameworks for identifying such manipulative behavior.This study focuses on developing a methodology to detect wash trading on Solana using pattern recognition, anomaly detection, and network analysis to identify circular trading patterns and interconnected accounts. It also examines how detection strategies from other blockchains and traditional financial markets can be adapted for Solana’s unique characteristics. Additionally, the research quantifies the prevalence of wash trading across different Solana exchange types, with a focus on order-book and automated market-maker (AMM) exchanges. By analyzing the patterns, actors, and impacts, this study aims to provide insights into how wash trading affects price dynamics and market integrity on decentralized platforms.

Research Questions

• RQ1: Quantification of wash trading in Solana
• RQ2: Market manipulation on Solana’s exchanges with a focus on Wash trades
• RQ3: Analysis of Market Manipulations Through Wash Trading on Solana