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95% of crypto trading volume on centralized exchanges are FAKE!

Towards the end of last week, Bitwise Asset Management, a leading Crypto asset management firm, presented a report to the United States’ Securities and Exchange Commission (SEC) on the scale and depth of the alleged wash trading and the downstream effect of inflated Bitcoin trading volumes on cryptocurrencies.

The report dated 20 March was submitted to the SEC in line with a rule change as part of their application to launch a Bitcoin Exchange Traded Fund [ETF]. Bitwise’s proposal has yet to receive any response from the SEC.

According to Bitwise’s report, 95% of Bitcoin [BTC] trading volume reported by cryptocurrency exchanges were fake or non-economic in nature. The real trading volume on crypto exchanges is only a tiny fraction of the total volume reported by leading websites like CoinMarketCap. Of the $6B daily trading volume reported, only $273 million is the actual trading volume, putting the daily actual turnover at 0.39%. This is in line with Gold’s daily turnover of 0.55%.

Source: Bitwise

This report is in line with a separate study conducted by the Blockchain Transparency Institute (BTI). In its December 2018 Exchange Volumes Reports, it had found that of the 25 BTC pairs listed by CoinMarketCap, only 2 pairs are not massively inflating actual volume. It also discovered the only exchanges not found to be massively wash-trading were Binance, Bitfinex, and Liquid.

The report found almost all of OKEx’s top 30 traded tokens were engaged in wash trading, along with the majority of top 25 trading pairs at Huobi and HitBTC, to a slightly lesser extent. An investigation into Bithumb uncovered a large amount of wash trading in Monero, Dash, Bitcoin Gold, and ZCash.

The primary reason why unregulated crypto exchanges inflate trading volume is to give them more negotiating power with Altcoins/ICOs for charging high listing fees. Data suggests that an average project spent over $50,000 in listing fees to unregulated crypto exchanges listed on BTI on the advisory list, totaling over $100 million spent in listing fee in 2018.

So you see, it does pay to be diligent and check out everything before you drop any money. Today we are fortunate to have the internet where you can find all kinds of information, but you will have to spend the time to dig deep.

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