Bitwise Tells SEC That Exchanges Fake 95% of Crypto Volume

By Prashant Jha

In a report to the US SEC (the United States Securities and Exchange Commission), crypto index fund providing firm Bitwise Asset Management has noted, with analysis, that about 95 per cent of supposed volume on crypto exchanges that are not legally regulated, are actually faked by them. Even if they are not entirely fake, most of these quoted values are non-economic, according to Bitwise.

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The report, published on the 20th of March, was a part of Bitwise’s submission to the US SEC with regard to a rule change they are currently proposing.

While the SEC’s reluctance to permit a Bitcoin ETF (Exchange Traded Fund) is quite well-known, Bitwise seems quite determined to have the SEC alter its rules so that it can launch its own Bitcoin ETF.

The primary contention of the said report seems to be the fact that most exchanges tend to highly exaggerate their trading volumes.

While they report trading a total of 6 billion dollars worth of volume across all spot markets, the reality seems to be quite different. The Bitwise report writes:

“Under the hood the exchanges that report the highest volumes are unrecognizable. The vast majority of this reported volume is fake and/or non-economic wash trading.”

Bitwise cites data collected from crypto stats aggregator and tracker service Coinmarketcap. It argues that the data displayed on Coinmarketcap, which is so widely accessed by people in the crypto world, tends to contain a very large amount of such unverified data. This allegedly alters the true representation of how big the Bitcoin market (or the market of any other cryptocurrency) is.

The company believes that the true size of the Bitcoin volume is worth around $273 million dollars only and it is faked to an extent where users do not realize that the actual market for Bitcoin happens to be: “significantly smaller, more orderly, and more regulated than commonly understood”.

The said report takes up the situation of Coinbase Pro as a case study and identifies trading patterns that seem to be more human and natural.

It looks for an uneven mix of buy and sell orders and also studies the spread at various exchanges. Coinbase Pro’s reporting of around $27 million worth of daily volume is argued as being more realistic than Coinbene’s $480 million.

The report, in conclusion, brings back focus to Bitwise’s ETF application as it tries to suggest that it is adherent to the provisions of the Exchange Act and should be allowed to be launched.