Reports on Wednesday, published by Bitwise, provide evidence that there’s about 95% of fake volume found on unregulated crypto exchanges. Presently, Bitwise is in the middle of gaining the approval they need to launch their Bitcoin exchange-traded fund (ETF), making this a perfect time to submit such a report to the US Securities and Exchange Commission (SEC). The crypto index and beta fund provider said that most of the volume on exchanges is considered
“fake and/or non-economic in nature.”
Bitwise also alleged that the “real” market has more organization, less volume, and more regulation.
Bitwise managed to find many suspicious trading patterns in a comparison between Coinbase Pro’s and other exchanges’ order books. One specific factor in the report discusses that the buy and sell orders are all in perfect succession. With Coinbase Pro, Bitwise noted that there was more randomness to the books, which they considered to be authentic. The idea that the buy and sell orders would be perfectly distributed is highly unlikely, unless it was untrue.
Changpeng Zhao, CEO of Binance, chimed in on the matter, saying that the purpose of faking the trading volume of a particular exchange would be done to increase their reputation on CoinMarketCap (CMC). CMC is a public ranking that shows all of the different cryptocurrencies by market capitalization, and the different crypto exchanges by trading volume. Having these details available on CMC helps with the traffic and profitability of any exchange, particularly when they are doing well.
Why do exchanges fake volumes? @CoinMarketCap 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. https://t.co/XTSez5ZRVh
— CZ Binance (@cz_binance) March 19, 2019
Zhao added that the biggest opportunity and provider of referral traffic for Binance has been CMC by a landslide. CMC’s website is the 448th biggest site in the entire world, ranking high in the US and Japan, which account for the largest trading volumes of Bitcoin.
The head of research at Bitwise, Matt Hougan, states that he does not see the recent report as something that could damage the chances of approval for their proposed Bitcoin EF. In fact, he said that this report should provide some reassurance to the SEC that the real crypto market has resistance against market manipulation, which the authority has voiced to be a major concern. Hougan continued, saying that it should not come as a shock that there’s a fake volume in the crypto market and that their role in exposing it just makes them the first firm to prove it.
The Bitcoin ETF will have a decision by the end of the month in regard to approval, rejection, or a review extension.