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House of Cards? Trade Volume of Big Exchanges Questioned

Amid market turbulence and general cryptocurrency uncertainty, some speculate fast-growing exchanges may be manipulating — or outright lying about — their trade volumes.


Questions about inflated exchange volume have long plagued the cryptocurrency world.

Outcry is now intensifying as once-unknown exchanges are enjoying seemingly smashing success in the midst of market slowdowns and uncertainty.

Reporters from Bloomberg recently wrote about the curious case of the BitForex exchange. Once relegated to obscurity, the platform has now been busy reporting about days where transactions exceed $5 billion dollars.

BitForex Vice President Garret Jin said the trading surge was just due to its transaction mining system, a practice some say is just a set up to inflationary wash trading activity.

Overall trading volume across the industry is expected to grow by 50% in 2019, but some are starting to wave a red flag while scrutinizing the alleged astronomical growth of once-small exchanges.

Scattered discourse on this topic has swelled in the past few months as more people in the industry believe exchanges are dramatically overstating their trading volume. This is done by offering incentives to inflate, or by simply turning a blind eye to blatant abuse on exchange platforms.

Allegations Everywhere

Allegations about fake trading volume are certainly not new. Just a few days ago, the popular exchange Coinbase fired back at New York Attorney General Barbara D. Underwood regarding its trade volume.

Bitcoinist reported that Attorney General Underwood alleged Coinbase “[…] disclosed that almost twenty percent of executed volume on its platform was attributable to its own trading.” Coinbase Chief Policy Officer Mike Lempres wrote:

Coinbase does not trade for the benefit of the company on a proprietary basis

In a March Medium post, trader and investor Sylvian Ribes noted his belief that the volume of fabricated cryptoassets was more than $3 billion dollars.

Ribes specifically called out OKEx, claiming 94% of its volume was nonexistent after allegedly reviewing publicly available data.

Others like EverMarkets Exchange CEO Jim Bai, see the problem of fraudulent volumes as just an ecosystem immaturity issue, asserting how legitimate exchanges will eventually pop up that

Provide enough real, beneficial structural incentives so that people won’t be misled into trading on questionable venues.

A Secret Brought To Light?

In August, the Blockchain Transparency Institute released a sweeping report alleging that 70% of the top 100 exchanges on sites like CoinMarketCap are “likely engaging in wash trading by at least 3x their stated volume.”

There are people who see these types of shady trading practices an instance of “everyone’s doing it, so I’m doing it,” according to Neil Woodfine of Clavestone.

According to Woodfine and Eterna Capital’s Asim Ahmad, inflated volumes from exchanges are likely due to automatic high-frequency trading strategies — a practice that has been regarded as concerning by the New York Attorney General.

How big of an issue do you think exaggerated or fraudulent exchange trade volumes are? Let us know your thoughts in the comments below!


Images courtesy of Bitcoinist archives, Shutterstock.

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