What is a wash trade?
Is there anywhere that describes the specifics of what Binance considers a wash trade?
As an example
– I have no orders in the market, I place a market order or limit order to buy TRX/USDT, the order is filled, I have no orders in the market again and now own TRX. Within a few seconds to minutes later I place another market or limit order to sell TRX/USDT, it is again filled by another market participant.
VS
– I have existing orders in the market and I am also the person filling my own orders.
Are both of these scenario wash trading?
Binance considers trading with yourself, or trading with a small pool of specific users (such as friends), to be “wash trading”.
Wash trading is trading with yourself to artificially increase volume. So basically your second example.
I don’t think Binance would care. They are charging you fees on both transactions.
A wash trade is selling an asset and immediately buying it back. In terms of the Binance competitions this creates artificial volume as you are not actually buying more of the asset, you are just re-buying your own asset. In terms of the IRS a wash sale is not allowed to determine a capital loss because it is a way to defer your taxes to future years. The timeline for the IRS is 31 days. If you sell an asset at a loss you have to wait 31 days to rebuy the same asset, if you want to claim the loss from the sale. If you rebuy the same asset within 31 days then it is a wash sale (you can not claim the loss).
If you did want to claim a loss this year for tax purposes however, you can sell your asset at a loss, purchase another asset that has similar performance (which in this market is just about literally any other asset), hold it for 30 days and then rebuy the original asset. This will allow you to capture any gains/losses that happened in the 30 days instead of just sitting on the sideline for 30 days.