Trading volumes on crypto exchanges may be 98 percent fake

The day before, analysts from the Blockchain Research Lab published a study of fake trading volumes on cryptocurrency exchanges. They found that many platforms artificially inflate activity in order to become more popular with traders . In addition, experts urged the management of CoinMarketCap and CoinGecko to develop more accurate methods for collecting data from exchanges.

Торговый объём — эквивалент торговых операций, на сумму которых трейдеры провели сделки. Этот показатель может свидетельствовать об активизации игроков и, как следствие, изменении настроений на рынке. Объёмы можно посмотреть на большинстве обозревателей индустрии. Вот, например, данные по показателям крупнейших криптовалютных бирж от CoinGecko.

Trading volumes of cryptocurrency exchanges

Trading volumes of cryptocurrency exchanges

Cryptocurrency Industry Challenges

The scale of the problem in the case of some crypto exchanges is critical – experts report a possible 98 percent of fake volumes on such platforms.

Fake transactions on the exchange artificially increase the reported trading volume and can lead to unfounded investment decisions, as well as unfair competition between different platforms. The Blockchain Research Lab study complements a comprehensive body of evidence that this practice is widespread in the cryptocurrency industry. And researchers want more attention to the problem.

Here is a quote from Blockchain Research Lab co-founder Ingo Fiedler quoted by Decrypt .

Crypto trackers like CoinMarketCap and CoinGecko should put more effort into filtering fake trading volumes on their websites.

То есть эксперт считает, что представители самых крупных платформ для анализа рынка криптовалют могут значительно улучшить ситуацию и более честно отображать актуальные данные. Однако для этого нужно желание.

In the study, exchanges were divided into three groups. The first is platforms that have little or no evidence of fake deals: Bitfinex , Bitstamp, Bittrex, Kraken, and Poloniex . The second is a group with mixed evidence of fraud: Binance, HitBTC, KuCoin, and YoBit . Finally, the exchanges that have shown irrefutable evidence of the presence of fake volumes: FCoin, Huobi and OKEx .

cryptocurrency rating of the exchange

Rating of exchanges by trading volumes CoinMarketCap. Binance comes first

In the period from July 23 to November 10, 2019, experts collected data on the volume of trades, the balance of Ethereum wallets and traffic on exchange sites. We analyzed pairs with Bitcoin , Ethereum , Ripple , USD and Tether .

This data was then compared to assess the extent of the fraud on selected exchanges. In the group of “unfavorable exchanges”, the volumes of the most popular trading pair – BTC / USD – amounted to only 490 million dollars . And this is well below what platforms usually report.

Чем выше торговые объёмы биржи, тем выше её ликвидность, то есть на ней можно совершать крупные сделки. Это привлекает больше трейдеров, которые генерируют новый трафик для биржи и дают ей прибыль с торговых комиссий. В итоге получается, что биржам выгодно, чтобы к ней заходили всё новые пользователи — отсюда и получается подобная ситуация.

cryptocurrency rating of the exchange

CoinGecko rating of exchanges by trading volumes. And here Binance is leading too

There is no such incentive for cryptocurrency trackers, although in the case of CoinMarketCap it is not so simple. Recall that the service was previously acquired by the Binance cryptocurrency exchange , which angered many in the crypto community. Critics insist that the deal between Binance and CoinMarketCap leads to a conflict of interest, meaning that now CMC can deliberately put the exchange at the top of the rankings. Which, in fact, is what CoinMarketCap does in the end – although over time everything seems to be working out.

По теме: Криптовалютные биржи завышают торговые объёмы почти в десять раз. Кому можно доверять?

Fiedler insists that platforms like CoinGecko and CoinMarketCap need to develop better methods for estimating trading volumes. Here is another of his remarks.

These sites are the most visited by millions of cryptocurrency traders. Such platforms can make a great contribution to fighting those who provide incorrect information.

Stock exchange

Stock exchange

Мы считаем, что фейковые объёмы действительно помогают платформам найти новых клиентов, однако чаще всего работают они только в двух случаях. Во-первых, подобным могут воспользоваться менее популярные биржи, которые хотят добиться известности. Таким образом ненастоящие данные могут уверить потенциальных пользователей в авторитетности платформы. Во-вторых, повестись на раздутые цифры могут начинающие трейдеры, которые, к примеру, ищут вариант сэкономить на комиссиях при совершении торговых операций. Именно так они натыкаются на неизвестные ранее площадки.

However, in the end, the situation boils down to the fact that experienced traders have accounts on several popular exchanges and change them depending on the required trading pairs. Obviously, competitors need to drag users not with fake numbers, but with something else.

If you have any questions when choosing a platform, read our guide on choosing a good cryptocurrency exchange . We are also waiting for you in Yandex Zen for a portion of articles that are not on the site.

Look for even more interesting things in our crypto chat for millionaires .

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