Nearly 95% of all reported trading in bitcoin is fake and in fact created artificially by unregulated exchanges, said a new study by Bitwise Asset Management, a San Francisco-based cryptocurrency index fund. The study report was presented by Bitwise to the US financial regulators list as the company is intends to list an Exchange-Traded Fund (ETF)
The report had already raised doubts about the concerns that it is being manipulated amid the recent over-inflation and prior to that a steep fall in prices of Bitcoin. The report revealed that real Bitcoin trading market is an order of magnitude smaller than is broadly reported.
Bitwise, a crypto-asset management firm, analyzed 81 exchanges, finding that 71 of them exhibited patterns that reflected artificial trading volume. One way to manufacture volume is via a technique called wash trading, in which someone simultaneously buys and sells the same asset. Although the exchanges in the study reported a combined $6 billion in daily volume during four days this month, Bitwise determined that only $273 million of it was real.
The parameter for the research study was ‘trading volume’ data with respect to the amount of Bitcoins held in the exchanges. On comparing the data from several Exchanges, the Bitwise report found authentic similarities in only ten Exchanges. They also found that nine out of the ten Exchanges have procured the required regulatory licenses.
1/ New Research from us @BitwiseInvest.
As part of 226 slides presented to the SEC on our ETF filing, we did a first-of-its-kind analysis of *order book data* from all 81 exchanges reporting >$1M in BTC volume on CMC.
TLDR: 95% of reported volume is fake but LOTS of good news! pic.twitter.com/TuXLlDCRyP
— Bitwise (@BitwiseInvest) March 22, 2019
Notably, Binance Exchange, which has recently launched its own blockchain and cryprtocurreny, was the exception out of the 10 exchanges.
The rest nine exchanges that reported authentic trading volume as per the report are – BitFinex, BitFlyer, BitStamp, Bittrex, Coinbase Pro, Gemini, itBit, Kraken, and Poloniex.
Matthew Hougan, Bitwise’s global head of research, told the Wall Street Journal that the point of submitting the analysis was to show regulators that “a real market for Bitcoin” still exists despite the storm of artificial trading. Solid evidence for this comes from the small number of exchanges that can actually verify that their trading data is real, he said. If approved, Bitwise’s fund would be based on the volume on those exchanges, which represents only around 5% of the generally reported total.
An another report which was an independent research conducted by TIE, developed in partnership with Social Market Analytics suggests that 59% of the exchanges have falsified their trading volume data by more than 90%. TIE, which is a platform for crypto traders, made a comparison between the website viewership metric and the reported trading volume on exchanges to found that 75% of them falsified data.
As a follow up to our suspicious cryptocurrency exchange trading volume report, we decided to look into where exchanges were receiving their website traffic from to see what incentives these exchanges had to manipulate volume.
— The TIE (@TheTIEIO) April 11, 2019
The exchanges dishonestly inflate their volumes in order to get benefited and one of the benefit these exchanges get is to attract ICO (initial coin offering) projects that want to be listed on exchanges that are facilitating lots of trading. To list such projects, some exchanges charge fees that can be as high as a few million dollars.