🔄 Wash Trading Detection
How do millions of dollars in 'volume' magically appear out of nowhere? Learn how the same funds are cycled repeatedly and how Taranoid catches it red-handed.
What is Wash Trading?
Wash trading is the process of generating artificial trading volume by executing self-trading loops among a coordinated group of wallets. Wallet A sells to B, B sells to C, and C sells back to A. Result: 3 transactions, but no real money has changed hands.
Cycle Example
3 transactions appear on-chain → Exchange shows 'high volume' → Real investors are lured in
Why Do They Do It?
Creating Perception
High volume = perception of a popular token. Climbing the ranks on CoinGecko/DEXScreener.
Triggering FOMO
An investor seeing $5M daily volume buys in out of fear of missing out (FOMO).
Pre-Pump Preparation
Setting the stage to dump the token on retail buyers after creating fake network activity.
VLR — Volume / Liquidity Ratio
Taranoid's most crucial metric is VLR (Volume/Liquidity Ratio), which flags wash trading using the following formula:
VLR = 24h Volume ÷ Liquidity Pool Example 1 (Normal): Volume: $500K Liquidity: $200K VLR = 2.5x ✅ Example 2 (Suspicious): Volume: $8M Liquidity: $80K VLR = 100x ⚠️ Example 3 (Critical): Volume: $50M Liquidity: $50K VLR = 1000x 🚨
Other Detection Signals
Back-to-Back <30s
Dozens of transactions bouncing between the same two wallets in under 30 seconds. Not human behavior.
Exact Amounts ±5%
Funds circling as 100 SOL → 100.3 SOL → 99.8 SOL. Tolerance is added to make it look 'organic'.
Late Night Activity
Anomalously high volume between 03:00–06:00 local time. The bot is working while humans sleep.
Few Unique Wallets
10,000 transactions but only 15 unique wallets. A real market has hundreds of different buyers.
🛡️ Taranoid Wash Trading Score
By combining VLR + loop detection + unique wallet ratio, a wash trading score from 0–100 is calculated. Tokens passing a score of 60+ have significant wash trading detected.
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