Did Jump Crypto cause Solana stablecoin volume to collapse?

This week, a chart circulated that appeared to show stablecoin volume on the Solana blockchain declining over 90% since a series of bad events at Jump Crypto, one of Solana’s biggest trading shops. 

However, whether or not Jump decreased its Solana trading activity, the claim that stablecoin volume is down 90% falls apart quickly on semantics alone.

Before addressing that issue, here’s a quick summary of recent events at Solana and Jump Crypto:

  • The CFTC launched an investigation into Jump Crypto, one of Solana’s biggest traders.
  • The leader of Jump Crypto, Kanav Kariya, suddenly left the company.
  • Pump.fun, a Solana meme coin generator, has gone viral, platforming countless celebrity rug-pulls.
  • Solana announced two new types of on-chain transactions, ‘Blinks’ and ‘Actions.’ Both are non-financial codes that allow people to transact on Solana’s blockchains directly from websites and social platforms by clicking simple buttons like ‘Share’ or ‘Like.’

And for further context, yes, Jump Crypto is one of the most important entities in the Solana ecosystem.

  • Jump is a prolific trader of Solana-based crypto assets.
  • The company develops code proposals for Solana’s consensus repositories.
  • Jump is building Solana’s second-biggest validator software client — second to Solana Labs’ own client.
  • Jump funded the largest-ever bailout of Wormhole, Solana’s then-largest asset bridge.

Back to that supposed Solana stablecoin collapse

‘Volume’ of stablecoin transactions on Solana doesn’t mean actual trades or peer-to-peer transfers. Instead, most dashboards include all stablecoin transactions in their ‘volume’ category, even if the transaction is entirely non-economic.

First, wash trading or trading back-and-forth with oneself runs rampant across decentralized finance, but that’s only the beginning of the non-economics of stablecoin ‘volume’ on Solana.

The data was fake all along.

Second, many stablecoin transactions are simply unfilled orders. Specifically, Solana’s so-called decentralized exchanges (DEXs) often broadcast all orders — even unfilled orders — onto Solana’s blockchain. Why not? Solana boasts the highest throughput and cheapest transaction fees of any major blockchain, so it is trivial for exchanges to simply broadcast bids and offers on-chain.

Counting unfilled stablecoin orders as ‘volume’ is highly misleading – especially when those program interactions account for over 99% of the total volume figure.

Worse, and returning to the point about wash trading: Many observers of crypto market data don’t understand the staggering extent of wash trading in crypto. Wash trading percentages on even the most highly regulated, New York City-based crypto trading pairs can reach 70%.

On offshore exchanges like Binance, that percentage has exceeded 99% on some pairs.

Finally, many stablecoin transactions are intentionally mislabeled. In other words, the data is a lie. Crypto exchanges are notorious for simply lying about their trade volume. Indeed, Bitwise once estimated that 95% of exchange-reported bitcoin transactions never occurred. Other academics have guessed at other percentages, but it’s impossible to know anything remotely close to the real number unless every crypto exchange operator were somehow forced to tell the truth — which will never happen.

Read more: Fantom stablecoin watcher alleges ‘liquidation’ scheme

Does it matter anymore if 99% is fake anyway?

In conclusion, the news about stablecoin volume on Solana collapsing after bad news at Jump Crypto seems to be overstated. Most of Solana’s real stablecoin volume figures are disconnected from the reported unfilled and wash trades by orders of magnitude.

When further compounded by crypto exchanges mislabeling and outright lying about their trading data, plus Jump Crypto’s ability to obfuscate its activities through on-chain privacy and OpSec practices, it’s almost impossible to know how much impact the news about Jump has impacted Solana’s stablecoin volume.

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