rading analytics platform The Tie published a report last Monday showing the top 100 Cryptocurrency Exchanges by reported volume. The findings were interesting. Around 90% of reported Cryptocurrency trade volumes appeared to be incorrect.
The discovery was a result of comparing lesser known exchanges versus well established exchanges such as Binance and Gemini. Analysts from the trading platform estimates that 87% of trading volume reported by the exchanges were potentially questionable and false.
75% of the exchanges in the report above are involved in some form of suspicious activities. The Tie Organization then added:
“If each exchange averaged the volume per visit of Coinbase Pro, Gemini, Poloniex, Binance, and Kraken, we would expect the real trading volume among the largest 100 exchanges to equal $2.1 (billion) per day. Currently that number is being reported as $15.9 (billion).”
Global cryptocurrency exchange Binance CEO Changpeng Zhao posted this on Twitter following the release of the report.
<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Why do exchanges fake volumes? <a href="https://twitter.com/CoinMarketCap?ref_src=twsrc%5Etfw">@CoinMarketCap</a> is highest traffic website in our space, and biggest referrer for all exchanges. Ranked high on CMC has benefits for getting new users. BUT at the expense of DESTROYING CREDIBILITY with pro users. Many forget the later part. <a href="https://t.co/XTSez5ZRVh">https://t.co/XTSez5ZRVh</a></p>— CZ Binance (@cz_binance) <a href="https://twitter.com/cz_binance/status/1107833648802197504?ref_src=twsrc%5Etfw">March 19, 2019</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
CoinMarketCap reports a daily Bitcoin trading volume of around $6 billion, but the actual figure is $273 million, or roughly 4.5% of the reported amount. Tim Enneking, managing director of Digital Capital Management commented on this report saying, ""IF true, it's clearly not a positive for the industry."
The report cites CoinBene, OEX, BW.com, BitForex, and Bibox as the top five most unregulated exchanges by trading volume.Enneking then listed a few reasons why an exchange would feel the need to inflate their trading volume.
Other than simply wanting to make volume appear larger than it is for commercial reasons (the greater the volume, the easier it is to attract even more traders).
Three other factors may play into the motivations behind exaggerating volume:
- The generalized decline in volume over the last 12 months or so, which makes appearing to be larger both more important and more difficult.
- The growing volume on OTC platforms, which both exacerbates and accelerates the first problem.
- The seemingly endless proliferation of new exchanges, meaning that more players are fighting for larger pieces of a shrinking pie.
It is important for investors to do thorough research and find trustworthy exchanges. Out of the 81 exchanges examined by the Bitwise report, only 10 provided legitimate trading volumes.
Bitwise released a tool following their report to help consumers to find legitimate exchanges. Binance, Coinbase, Bitfinex, and Kraken are some of the exchanges platforms listed that provides real trading volume.