Detecting unusual trading patterns on cryptocurrency exchanges by means of complexity measures

2026-07-15

AI Summary

This study addresses the issue of artificially generated trades on cryptocurrency exchanges, which can distort market liquidity and transparency, by proposing an anomaly detection framework that integrates complexity- and statistical structure-based features. For the first time, multifractal analysis, approximate entropy, and detrended cross-correlation analysis are jointly applied to high-frequency tick-by-tick trading data to extract deep patterns from log returns, trading volume, and trade count. The approach uncovers exchange-specific anomalies invisible to conventional price-based indicators: following mid-May 2025, Bitget exhibited a sharp surge in trade count for BTC and ETH without corresponding increases in volume or volatility, alongside characteristics of low-value, high-frequency transactions, weak cross-asset correlations, and elevated irregularity—strongly indicative of wash trading activity.

Abstract

Artificial transaction generation remains an important source of potential market manipulation on cryptocurrency exchanges, as it may distort reported liquidity and reduce market transparency. This study proposes a diagnostic framework for detecting unusual trading patterns based on complexity and statistical-structure measures derived from high-frequency trade-level data. The analysis considers log-returns, trading volume, and transaction counts, using tail distributions, autocorrelation functions, multifractal characteristics, approximate entropy, and detrended cross-correlations. The methodology is applied to BTC, ETH, and XRP traded on Binance, Bitget, KuCoin, and Kraken over the period from April 1 to June 30, 2025. The results reveal a pronounced anomaly on Bitget for BTC and ETH after mid-May 2025. The number of transactions increases sharply, but there is no proportional increase in traded volume or return fluctuations. This regime is characterised by numerous low-volume trades, weaker autocorrelations, reduced multifractal organisation, higher short-pattern irregularity, and weaker cross-correlations involving the transaction-count series. These features are consistent with a noise-like component in trading activity and may indicate artificially increased transaction counts, although they do not provide direct proof of wash trading. The findings show that complexity-based indicators can be useful for detecting exchange-specific trading anomalies that remain hidden in price-based measures.

Problem

• market manipulation
• artificial transactions
• trading anomalies
• cryptocurrency exchanges
• liquidity distortion

Innovation

• complexity measures
• anomaly detection
• cryptocurrency exchanges
• multifractal analysis
• approximate entropy