Bitwise, the company that pioneered crypto asset management and founded the world’s first cryptocurrency index fund, conducted a study that revealed 95% of bitcoin trading reported are mere hoaxes. The asset management company followed up a survey conducted by the Wall Street Journal in light of concerns voiced by regulators about cryptocurrency market, and its vulnerability to trading manipulation.
While in the process of listing the first bitcoin Exchange Traded Fund (ETF), Bitwise met with officials of the Securities and Exchange Commission (SEC) to submit its analysis. The firm reviewed the top data furnished by CoinMarketCap.com and analyzed the volume of top 81 crypto exchanges. The analysis revealed that of the aggregate $6 billion reported by CoinMarketCap as average daily bitcoin volume, only $273 million worth is legitimate.
Matthew Hougan, Bitwise Global Head of Research remarked,
“People looked at cryptocurrency and said this market is a mess; that’s because they were looking at data that was manipulated. The idea that there’s fake volume has been rumored for a long time; we were just the first people to systematically look at which exchanges were delivering real volume,”
Salient Points of the Bitwise Bitcoin Trade Analysis
In assessing the $27 million average trade volume (ATV) reported by San Francisco-based company, Coinbase Pro, the asset management company established a bitcoin “median spread” of one (1) cent. Median Spread is significant because it pertains to the difference between a bitcoin seller’s asking price and the price a bitcoin buyer would be willing to place as exchange. On Bitwise’s evaluation, Coinbase Pro’s trading scenario is legitimate.
Pitting the Coinbase Pro data against those that made a showing of having the biggest reported exchanges tracked by CoinMarketCap.com, Bitwise found bitcoin exchanges in most entities have extreme median spread.
Reported exchanges at CoinBene for one, resulted to a $15 median spread, which Bitwise found as dubious. CoinBene’s AVT was 18 times greater than that of Coinbase Pro. It therefore came as a surprise that such volume would come from a trading company that has a median spread that is 1500 greater than a cryptotrader like Coinbase Pro that has 1 cent median spread.
Not surprisingly, further analysis of reported bitcoin trading revealed median spreads as extreme as $300 and higher.
The fake exchanges are driven by fees awarded to those who can attract listings for fresh initial coin offers (ICO), targeting those seeking to have their cryptocurrency placed on where heavy trading transpires. Autonomous Next previously reported data showing fees ranging from $1M to $3M per listing; whilst suggesting the crypto cycle incentives promote fraudulent behavior from bad actors.