During the 2022 Super Bowl, the trading site Crypto.com Ethereum and Tether, occurred at oddly regular intervals.
In the ordinary course of things, trading in crypto—or other assets—takes place in a series of spikes and troughs that coincide with price movements. A jump or fall in the price of, say, Bitcoin will lead to a flurry of activity by traders and bots that then subsides when the price stabilizes. Unusually, the TradingView slides show trades at Crypto.com taking place at a fairly steady pace—even while, at other exchanges over the same period of time, the pattern reflected the customary bursts and ebbs.
“It’s confusing,” says Adam McCarthy, a research analyst at Kaiko.
Market making and prop trading
The practice of “wash trading,” which describes one party taking both sides of a trade, is generally treated as illegal but has long been pervasive in the crypto world. The tactic is typically used by new cryptocurrency projects to inflate their trading volume, but has also been used by exchanges—including by Binance, which admitted in a 2023 settlement with the Department of Justice that its U.S. affiliate had engaged in wash trading years ago.
According to McCarthy, the research analyst, it’s possible that wash trading contributed to Crypto.com’s recent surge in volume, but he says other explanations are more likely. He posited that some of the volume came from the exchange having a prop desk, or in-house trading team. McCarthy pointed to recent job ads describing such a team, one of which Fortune independently located on LinkedIn . As seen in the screenshot below, it describes developing and implementing trading strategies:
While investment banks like Goldman Sachs have long had in-house traders, it is unusual for an exchange—crypto or otherwise—to have one since it risks creating a conflict of interest.
“Why be active if you’re just going to be front run by an internal trading team?” asked McCarthy rhetorically, describing a scenario where an in-house team sees impending customer trades and places trades of their own first.
McCarthy added that the existence of Crypto.com’s internal trading team does not necessarily imply anything nefarious, and the team’s purpose may simply be to trade with customers, ensuring they have a smooth experience on the platform.
Tucker, the Crypto.com spokesman, said no conflict of interest exists, stating: “Our internal quant team is focused on building innovative solutions to improve our platform’s performance, pricing models, and risk management tools as part of our broader risk team effort. These teams are critical to ensuring we remain competitive and offer the best trading experience possible to our users, while adhering to strict separation rules.”
Finally, there is one more potential contributor to Crypto.com’s surprising gains: market makers. These are outfits—common at both crypto and traditional stock exchanges—that make a business out of stockpiling assets in order to profit from supplying liquidity to the market. Both McCarthy and executives at two competing crypto exchanges, who were not authorized to speak on the record, told Fortune a good portion of Crypto.com’s trading volumes likely comes from market makers.
If this is the case, it is notable, since two of the industry’s largest market makers, Jump Trading and Jane Street, exited the business in 2023 amid regulatory scrutiny—raising the question of which entities are providing services to Crypto.com instead. Fortune repeatedly asked financial giant DRW, whose subsidiary Cumberland does crypto market making, if it provides services to Crypto.com, but did not receive a reply.
In response to a question about its market making arrangements, Tucker stated: “I’m afraid we can’t divulge the names of our market makers as they’re protected by confidentiality agreements.”
The upshot of all this is that Crypto.com has found a way to push into the top tier of exchanges, and spend lavishly to promote its brand, but that it is also hard to tell with certainty how it is accomplishing this feat. The company, for its part, suggested there is nothing to question.
“Questions over our success are inevitable given the fact that our competitors were caught flat-footed as we continued building and innovating what is now the leading global exchange of U.S. pairs,” said Tucker.