New BTI Research Suggests Over $6 Billion In Fake Daily Crypto Volume
The Blockchain Transparency Institute (BTI) released a report suggesting that exchanges may be faking trade volume to gain a competitive advantage.
The Blockchain Transparency Institute (BTI) earlier this week released the findings of its research which shows that most of the cryptocurrency exchanges fake their daily volume.
Even with the new ‘Adjusted Volume’ parameters used by CoinMarketCap, exchanges fake at least $6 Billion daily in crypto volume claims the report.
Seven of the top ten exchanges fake their trading volume
In its research, BTI looked into the user activity and traffic generated by the biggest crypto exchanges and comparing the trading volume using available order book liquidity and unique daily visitor counts. This enabled the BTI to determine a more accurate exchange rankings list.
For web traffic, BTI made use of SimilarWeb as it is considered as the most accurate source of the technology available. Slippage meanwhile was used to evaluate order book liquidity and to confirm whether exchanges are demonstrating accurate volume.
The research conducted using Slippage accurately tallied with the largest number of unique visitors reported by SimilarWeb.
At the moment, CoinMarketCap shows that the total cryptocurrency market has a daily volume of $13 billion. BTI, however, showed that $6 billion out of that figure is faked, due to various wash and bot trade strategies used by cryptocurrency exchanges.
The research pointed out that most cryptocurrencies have increased their daily trading volume by at least three-fold through opaque and deceptive activities.
In its chart, BTI claims that exchanges with a 1.0 adjusted volume differential appear to be reporting accurately. Some of those exchanges include Binance, Bitfinex, Coinbase, Bithumb, Kraken, Bitstamp, Gemini, amongst others.
BTI pointed out that even though they have a differential of 1.0, that doesn’t mean that there is no possibility of wash trading going on. It just means that wash trading on this exchanges cannot be detected using their model.
BTI further pointed out that the likes of Bittrex, KuCoin, Cryptopia, and Bithumb record a much higher unique visitor counts than what is expected to be seen in their trading volumes.
This implies that they are accurate and have the potential to report even higher trading volumes.
Most of the exchanges listed on CoinMarketCap and other crypto market data providers record tens of thousands of unique visitors every day and hundreds of millions of daily trading volume on a daily basis. BTI believes that most of those figures cannot be justified.
BTI pointed out that exchanges that report data accurately outside of the big money exchanges usually have a volume/user to unique visitor ratio between 2% to 5%. Exchanges faking data meanwhile record a ration from 10% up to over 655,000%.
The exchanges with very high volume/visitor numbers were re-evaluated and it was discovered that they have an average of 3.5%, similar to the accurate exchanges.
ZB exchange and Lbank were discovered to be the biggest offenders as they wash trade their volumes to over 390x and 4,400x respectively.
Why do exchanges fake trading volume?
The most obvious reason why exchanges fake their trading volume is so they can sound appealing to investors on the cryptocurrency ranking platforms.
Considering the fact that exchanges have had 83 percent of their referral volume from CoinMarketCap, it became important to them to fake volumes so they can get more traders.
Binance tops the new rankings, Bitfinex comes second
BTI in its report stated that Binance is the leading cryptocurrency exchange as it has the largest unique visitors per day. Bitfinex comes in second. Coinbase is the largest crypto exchange in the U.S.
In South Korea however, Bithumb has overtaken Upbit to take the first spot. Bithumb occupied the fourth position on the total rankings while Upbit was down at sixteen.