Mark Cuban predicts this will be the ‘next possible implosion’ in crypto—here’s how to avoid it

Billionaire Mark Cuban believes an age-old market manipulation tactic could be the next thing to rock the cryptocurrency industry.

“I think the next possible implosion is the discovery and removal of wash trades on central exchanges,” the longtime crypto investor tells TheStreet.

A wash trade is when a trader buys and sells the same financial asset multiple times in order to generate fake volume and make it appear as if there is a high demand for the asset. This artificially inflated demand can mislead other traders into investing real money into the asset.

Since higher demand typically leads to higher prices, traders can use this process as a type of “pump-and-dump” scheme: When the price is as high as the trader thinks it can go, they can cash out and leave other investors with the asset that’s declining in value.

Although wash trading has been illegal within traditional U.S. financial markets for decades, it’s likely difficult to crack down on the activity within the crypto space.