Bitcoin accounts for 40% of the $1 trillion in crypto assets outstanding, according to Forbes Director of Data and Analytics. “An estimated 46 million adult Americans already own it, according to the New York Digital Investment Group…”
“But can you trust what your crypto exchange or e-broker is reporting on trading the major digital currency?” One of the most common criticisms of Bitcoin is the ubiquitous wash trading (a form of fake volume) and the bad monitoring of the stock exchanges. The US Commodity Futures Trading Commission defines wash trading as “entering into transactions, or pretending to enter into transactions, to make it appear as if purchases and sales were made without incurring market risk or altering the trader’s market position.” The reason some traders wash trade is to inflate an asset’s trading volume to give the appearance of increasing popularity. In some cases, trading bots execute these wash trades in tokens and increase volume, while insiders simultaneously amplify activity with bullish remarks and pump up the price, effectively a pump-and-dump scheme. Wash trading also benefits exchanges as it allows them to have more volume than they actually have, potentially encouraging more legitimate trading.
There is no universally accepted method of calculating daily Bitcoin volume, even among the most reputable research firms in the industry. For example, as of this writing, CoinMarketCap puts the last 24-hour trade in Bitcoin at $32 billion, CoinGecko at $27 billion, Nomics at $57 billion, and Messari at $5 billion.
As part of Forbes research on the crypto ecosystem using 2021 data, we ranked the top 60 exchanges in March. Recently, we took a deeper dive into the bitcoin trading markets… Our study evaluated 157 crypto exchanges around the world. Here are our key takeaways:
– More than half of the total reported trading volume is likely fake or uneconomic. Forbes estimates that the global daily Bitcoin volume for the industry was $128 billion as of June 14. That’s 51% less than the $262 billion that would be obtained by taking the sum of self-reported volume from multiple sources….
– The biggest problem areas regarding fake volumes are companies that advertise large volumes but operate with little or no regulatory oversight that would make their numbers more credible, notably Binance, MEXC Global and Bybit. Overall, the less regulated exchanges in our study account for about $89 billion of true volume (they claim $217 billion).
Forbes adds that their report “builds on the important work of other digital asset researchers like Bitwise, who in a March 2019 white paper estimated that 95% of CoinMarketCap’s bitcoin trading volume was fake and/or non-economic.”
Her article contains some other interesting findings, including an observation that Tether “continues to be a dominant player in the crypto trading economy, particularly when it comes to trading Bitcoin. Its current market cap is $68 billion, despite questions about its reserves.”
Thanks to Slashdot reader rrconan for sharing the article…
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