Are More Than Half of All Bitcoin Trades Fake?
Bitcoin represents 40% of the $1 trillion outstanding crypto assets, according to Forbes' director of data and analytics. "An estimated 46 million adult Americans already own it according to New York Digital Investment Group..." "But can you trust what your crypto exchange or e-brokerage reports about trading in the most important digital currency?" One of the most common criticisms of bitcoin is pervasive wash trading (a form of fake volume) and poor surveillance across exchanges. The U.S. Commodity Futures Trading Commission defines wash trading as "entering into, or purporting to enter into, transactions to give the appearance that purchases and sales have been made, without incurring market risk or changing the trader's market position." The reason why some traders engage in wash trading is to inflate the trading volume of an asset to give the appearance of rising popularity. In some cases trading bots execute these wash trades in tokens, increasing volume, while at the same time insiders reinforce the activity with bullish remarks, driving up the price in what is effectively a pump and dump scheme. Wash trading also benefits exchanges because it allows them to appear to have more volume than they actually do, potentially encouraging more legitimate trading. There is no universally accepted method of calculating bitcoin daily volume, even among the industry's most reputable research firms. For instance, as of this writing, CoinMarketCap puts the latest 24-hour trading of bitcoin at $32 billion, CoinGecko at $27 billion, Nomics at $57 billion and Messari at $5 billion.... As part of Forbes research into the crypto ecosystem using 2021 data, we ranked the 60 best exchanges in March. More recently we conducted a deeper-dive into the bitcoin trading markets.... Our study evaluated 157 crypto exchanges across the world. Here are our main findings: - More than half of all reported trading volume is likely to be fake or non-economic. Forbes estimates the global daily bitcoin volume for the industry was $128 billion on June 14. That is 51% less than the $262 billion one would get by taking the sum of self-reported volume from multiple sources.... - The biggest problem areas regarding fake volume are firms that tout big volume but operate with little or no regulatory oversight that would make their figures more credible, notably Binance, MEXC Global and Bybit. Altogether, the lesser regulated exchanges in our study account for approximately $89 billion of the true volume (they claim $217 billion). Forbes adds that their report "builds on top of the important work done by other digital asset researchers such as Bitwise, which estimated in a March 2019 white paper that 95% of CoinMarketCap's bitcoin trading volume was fake and/or non-economic." Their article includes some other interesting findings, including an observation that Tether "continues to be a dominant player in the crypto trading economy, especially when it comes to trades against bitcoin. Its current market capitalization is $68 billion, despite questions about its reserves." Thanks to Slashdot reader rrconan for sharing the article...
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