95% of Bitcoin Exchange Volume Is Fake?

By Rushali Shome

The crypto market, with its lack of regulations and unclear specifications, leaves a great deal of open endings. As a result, we hear about cryptocurrency scams and fraudulent ICOs, and often do not know what to do about all it. But one thing that most crypto enthusiasts place their trust on are cryptocurrency exchanges and when they are accused of fraudulence, it really makes us wonder what we have gotten ourselves into. So, do 95% of crypto exchanges really fake their volume?

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Now, if this is the first time you are hearing of such a possibility, then it is time for you to realize how murky the waters of the crypto world can oftentimes get.

What began this whole conversation about such a large number of exchanges, including top cryptocurrency exchanges, faking their exchanges? Let’s find out!

Bitwise Asset Management’s Report

An asset management firm called Bitwise submitted an application to the US Securities and Exchange Commission (SEC), seeking permission to launch an exchange traded fund based on Bitcoin.

Along with their application, they attached a report which revealed that 95% of the reported trading volumes they studied were dubious in nature.

In March this year, Bitwise chose 81 exchanges and tracked their Bitcoin trading data over the course of four days. Then, after having collected all this data, they analysed it and revealed patterns that tended to give the idea that the trading data looked fabricated.

A statement from Matthew Hougan, who heads global research in Bitwise said:

“The fact that a significant portion of the reported daily volume in bitcoin is demonstrably fake will be unsurprising to many in the industry. Market participants have long understood, and experienced first-hand, that a substantial portion of reported volume is fake. This report is simply the first time that the data has been comprehensively assembled and analyzed to formally corroborate those anecdotal suspicions.”

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Bitwise concluded that only 273 million dollars worth of trading was legitimate out of the total of 6 billion dollars reported, as trading volume.

Hougan has earlier stated that if Bitwise is permitted to launch the Bitcoin ETF, then it will be based on the little trading that it believes is actually correct. The top five unregulated exchanges by trading volume, according to the Bitwise report, are CoinBene, OEX, BW.com, BitForex, and Bibox.

Is This Allegation True?

Unless more survey and research organizations come forward and investigate into the issue, it is difficult to conclusively state whether or not the Bitwise report is correct or not.

Even so, it is true that these allegations are far from being the very first. The crypto community insiders are already aware of such a possibility, although the extent remains untapped, till now.

Considering that Bitwise went forward and submitted this report to the SEC suggests that they are quite confident in their assertion.

They have also released a tool to assess whether a crypto exchange is faking trading volumes or not. Even if they have not gotten the percentage accurately, they are definitely on to something and we would need more studies to find out to what extent.

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Rushali Shome

Rushali Shome is a history undergraduate with a keen interest in puns, politics and beyond. When not typing away furiously in the “Notes” section of her phone, she can be found trying to catch the eye of servers at restaurants or weddings for a second helping.

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