Messari, a crypto analytics firm, recently announced one of its
newest products, “Real 10 Volumes”, an index for 10 digital money
exchanges. As a result, it will now limit all of its default calculations on
volume to the numbers given by these trusted exchanges. These select few include Binance, BitFlyer, BitFinex,
Bitstamp, Coinbase Pro, Bittrex, ItBit, Gemini, Poloniex and Kraken.
In their explanations, Messari
defends its position on the “Real 10” on reports of the exchange’s
“significant and legitimate trading
volumes via their APIs.” The firm, however, is in the next few months
open to adding more exchanges who have clean book data.
Trade Volumes in Exchanges
Earlier this year, Bitwise, in their research findings
concluded that at least 95 percent of the volume on most unregulated crypto
exchanges was ‘non-economic.’ They went on to state that “under the hood the
exchanges that report the highest volumes are unrecognizable. The vast majority
of this reported volume is fake and/or non-economic wash trading,”
As expected, a lot of new crypto
trade platforms have emerged not only to meet the need but to profit from the
expansion currently going on in the digital currency market. It has become
apparent however that some of these newcomers are according to their trading
volume figures, doing way better than the established and community trusted
exchanges. Lbank, CoinBene, BitMax, ZB.com have all reported higher trading
volumes than Binance, BitFinex or Kraken. Such statistics have raised a lot of
eyebrows especially after the Bitwise Asset Management report on the high
levels cooked data prevalent in the crypto market.
This data has further been
reinforced by The Tie, that has asserted that at
least 90 percent of crypto exchanges do report incorrect data. The team behind the
crypto trading platform went on adding:
“If each exchange averaged the volume per visit of CoinBase Pro, 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).”
Not Use Blockchain Data?
The beauty of cryptocurrencies
and their data is that it runs on blockchain, the epitome of financial
transactions transparency. ViewBase took advantage of this strength and analyzed Ethereum
wallets on exchanges. They hoped to find reasonable balances proportional to an
exchange’s trading volumes. They like the above two reports found glaring
As per their data, the larger
and older exchanges were definitely still on the lead. However, newer
exchanges like KuCoin and Huobi had more ERC20 coin balances possibly
because they are well known as altcoins exchanges. All things considered, the
top exchanges in trade volumes were Binance, Kraken, Huobi, Bittrex, FCoin, BitFinex,
Kucoin and Poloniex.
While wash trading is a
significant factor when it comes to misleading volume data, algorithmic trading
bots could also cause a misreporting. Thanks to rising fraud it is also
possible that investors no longer want to store funds in an exchange’s
wallet. Alternatively, high volume data
may be brought on by an exchange’s bid to raise the volume. BitForex, for
instance, practices ‘transaction mining’ that not only gives them better
returns but also ends up pumping their volumes.
However, at the end of the day, false data reporting puts
traders, especially those who move large volumes at high risk. As Changpeng
Zhao CEO Binance said, an exchange will”get new users….BUT at the expense of DESTROYING
CREDIBILITY with pro users.”
History, however, has shown that exchanges that heavily rely on old fashioned credibility and trust will crumble under the deception and secrecy prevalent in the crypto-sphere. Blockchains, however, are inherently transparent through the ability for investors to understand and analyze their data could be a hindrance to the data’s use. Exchanges, though, should endeavor to report blockchain backed data to ensure healthy trade practices.