The Blockchain Transparency Institute (BTI) just released its December 2018 Exchange Volumes Report. According to the researchers, only 2 out of 25 of the major cryptocurrency exchanges did report their trading volumes correctly. These two exchanges are Bitfinex and Binance. The rest is suspected to do wash trading, increasing trading volume artificially. In total, 87% of trading volume of the Top 25 exchanges might be fake.
According to the report, even CoinMarketCap is to not a reliable source. Of the 25 exchanges listed on CoinMarketCap, 11 faked their trading volumes by up to 99%. Therefore, researchers calculated the correct volume of the Top 25 BTC trading pairs on Coinmarketcap.
Most of these pairs have an actual volume of less than 1% of their reported volume on CoinMarketCap. 12 of the largest cryptocurrency exchanges such as Huobi and OKEx are faking more than 75% of their trading volume, according to blockchaintransparency.org.
Lack of Regulation a reason for market manipulation?
Many of these exchanges are located in places like the Cayman Islands and Gibraltar, which lack of rules to control manipulation. Binance is headquartered in Malta, while Bitfinex is based on the British Virgin Islands. Even though, those two are the only exchanges that were excluded from the allegations of trading volume manipulation.
At the same time, Bifinex is being criticized for the Tether (USTD) controversy. Many analysts believe that the massive issuing of Tether by the end of 2017 significantly affected the bull run during the same period.
According to the report, Binance, under the leadership of CEO Changpeng Zhao, appears to be the most reliable exchange. Binance has recently committed to donating all of its listing fees to charity organizations. The exchange also participates actively in the development of the crypto ecosystem by taking initiatives to provide education and funding.
The report also claims that there is clear evidence of wash-trading on most exchanges:
“For our December report we’ve taken a deeper dive into specific trading pairs on exchanges which are showing clear evidence of wash trading. This has always been our goal, however we wanted to make sure this data was as accurate as possible, so we’ve been updating and perfecting these algorithms over the past 3 months.”
“During this time, we have spent countless hours watching order books, analyzing volume data points, and speaking with market makers, high frequency traders, and trade surveillance consultants. We have collected an enormous amount of data and we now feel confident to begin releasing these figures.”
Wash Trading is a form of market manipulation where investors buy and sell a financial instrument at the same time. The intention is to artificially increase the trading volume make the financial asset look worth more than it actuall is.
Trading Pair manipulation
According to the report, OKEx is working with the top 30 tokens in Wash Trading. The exchange did benefit the most from referral traffic by CoinMarketCap. However, after adjusting OKEx’s trading volume, the exchange still manages to be in the Top 10 in terms of trading volume on CoinMarketCap.
On the other hand, Huobi manipulate 25 trading pairs, albeit to a lesser extent than OKEx. The same goes for HitBTC. Bithumb manipulated trading volumes of Monero, Dash, Bitcoin Gold and ZCash by Wash Trading, according to the report.
This is a shocking revelation and is likely to affect many crypto investors who want to make an informed decision. But there is also hope: the entry of institutional actors like Nasdaq and Bakkt in 2019 can lead to more regulation and reduce the likelihood of data manipulation.
What do you think? Will regulation end the manipulation of reported trading volumes? Let us know in the comment section below.
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