Market Overview

$6 Billion Daily Crypto Volume is Being Faked, How Can it be Combated?

Earlier this week, the Blockchain Transparency Institute (BTI) published a report claiming that the global crypto exchange market is faking $6 billion of its daily volume. The researchers at BTI evaluated the user activity and traffic of the market’s biggest crypto exchanges, comparing their projected trading volume to other metrics. Slippage, a method utilized by cryptocurrency researcher Sylvain Ribes in his investigation of crypto exchanges, was employed by the researchers to analyze order book liquidity and to confirm whether exchanges are demonstrating accurate volume.

Currently, according to CoinMarketCap, the daily trading volume of the crypto exchange market is around $13 billion. BTI claimed in its report that $6 billion in daily crypto trading volume is faked, nearly 50 percent of the market’s daily trading volume, mostly because of various wash and bot trade strategies implemented by digital asset exchanges. Its research, which cited web traffic, engagement, and volume from trusted sources like Similar Web, revealed that more than 70 percent of cryptocurrency exchanges have inflated their trading volumes by at least three-fold through opaque and deceptive activities.

According to BTI, the majority of the traffic and volume of cryptocurrency exchanges come from affiliate links cited by CoinMarketCap. Some exchanges have had 83 percent of their referral volume from CoinMarketCap. Hence, it is of utmost importance for cryptocurrency exchanges to appeal to investors on cryptocurrency market data platforms with high volumes, as investors tend to avoid digital asset exchanges with low liquidity due to the difficulty in buying and selling low market cap cryptocurrencies. One immediate solution to fake and inflated volumes is to encourage market data providers to attempt to filter out wash and bot trades. But, as of current, unless regulations require otherwise, it is extremely difficult for platforms to recognize and eliminate exchanges that grow their volumes illegitimately.

$6 Billion Daily Crypto Volume is Being Faked, How Can it be Combated?, CCN, Aug 29
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