Fake Trading Volumes and the Price of Bitcoin: Are They Connected?

Last year, Bitwise Asset Management reported to the United States Securities and Exchange Commission that 95% of trading volume in Bitcoin (BTC) was fake. Bitwise found that, according to data published by CoinMarketCap — a widely cited tracker of crypto statistics — Bitcoin’s approximate average daily volume in April 2019 was $10 billion. In comparison, just $5.5 billion worth of Apple stock — the most liquid stock in the world — trades daily, and the market cap of Apple stock is nine times the size of Bitcoin’s.

Related: Data Transparency and Fake Trading Volumes — Institutionalizing Crypto

The Blockchain Transparency Institute has been investigating fake volume in crypto markets since 2018. Its April 2019 report suggested that 17 of the 25 largest exchanges listed on CoinMarketCap had more than 99% fake volume. The most recent report from September 2019 showed “wash trading rates at high levels from 96.9% up to 99.7%.”

As recently as 2019, the exchanges reporting the most volume were in some cases unheard of. According to Bitwise’s research, the largest reported exchange from April 2019, FCoin, declared $1.7 billion in daily trading volume, despite at the time having just 4,781 followers on Twitter. It had been mentioned only four times on Bloomberg, all in the context of fake trading volume, and the marketing tool Alexa ranked it as having the 56,539th largest website globally.

The Bitwise study ranked Binance as the largest exchange with real volume, though it ranked 15th overall when those reporting fake volumes were included. During April 2019, Binance reported $218 million in daily trading volume — 1/7th that of FCoin — despite being mentioned 6,830 times by Bloomberg, its CEO being followed by 342,000 people on Twitter, and having a website that ranked 971th in the world, according to Alexa.

The Bitcoin market is steadily maturing, to be sure, and today’s Bitcoin market is not like it was in the past. Many first-generation pillars…

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