Exchanges exaggerating volumes by 800%

crypto.inferno (67)in #blockchain • 5 years ago

Naughty, naughty exchanges have been lying about the amount of crypto they actually buy and sell, which will come as a SHOCKING surprise to almost no one.

Crypto exchanges are a law unto themselves. Ok, there are a few that are pretty decent now, and toeing the line because they know that the public will only use them if they are well-run and properly regulated. But there are plenty of others that are frankly cesspools.

There is lots of shady stuff that comes with this lack of rules. Security practices that a child could wander through. Insider trading. Pump-and-dump schemes. And wash trading. Lots of wash trading.

Wash trading simply means that someone – quite possibly sanctioned by the exchange itself – is selling coins backwards and forwards to themselves, making it look like there’s lots of interest and market activity, when in fact there isn’t. Wash trading is illegal in the conventional markets, because it’s associated with pump-and-dumps: scammers accumulate a security, signal interest in it with fake volume, wait for unsuspecting buyers to push the price up, and then sell at the top.

This has always been suspected on crypto exchanges, which frequently post massive volumes but somehow don’t have the actual liquidity to allow regular traders to buy and sell large quantities of coins without horrendous slippage. Now we have some idea of how bad the situation really is. Forbes records:

While exchanges like Kraken, Binance, and Coinbase show similarities between viewership and trading volume, others like Coinbene and ZBG have suspiciously high reported volume vs. views.
Some notable outliers were BitMax, Lbank, BW, and ZBG which had extremely high reported volumes, but expected volumes which in some cases were less than 1% of what they reported.
If each exchange averaged the volume per visit of CoinbasePro, Gemini, Poloniex, Binance, and Kraken, we would expect the real trading volume among the largest 100 exchanges to equal $2.1 billion per day. Currently, that number is being reported as $15.9 billion.

There are a few legitimate players – exchanges like Binance, Kraken and Coinbase. But there are others who are inflating their figures by a massive one hundred times. And overall, reported volumes are 8 times higher than the reality.

Just another day in crypto, then.

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