Topic: New Report Warns 87 Percent of Cryptocurrency Exchange Volume Is Potentially Sus (Read 551 times)

While we know that exchanges do in fact exaggerate the level of trading taking place in their platforms this study and its methodology leaves a lot to be desired, but when it comes to fake news that doesn't matter what matters is that they can write that there is something wrong about the market of cryptocurrencies and scare people away from the market, this is a study that already had the conclusion before they made any kind of calculation or investigation about the subject

Not just important but very important. As it looks almost 1/4 of all bitcoin trades goes on binance.  I doubt is much different with alts.

Binance had some luck with the momentum they had going for themselves, but the most important aspect is that where their brave compliant competitors did everything to not break any laws where they offer their services, Binance just didn't give a shit and entered as if it was their right to settle there.

IIRC, Japan has been the only country actively trying to make Binance comply, but for whatever reason, Binance chose to halt their services in Japan and exit entirely. Such a large and successful exchange has no problems financially covering all the costs, so there must be other (potentially shady) reasons they didn't want to register and get themselves audited.

On the other hand, they are very important for Bitcoin because all the altcoin and ICO shit there increases the demand for Bitcoin because that's what most people use to trade.

It wasn't like that as far as I know. There were suspicions of fake volume on big Chinese exchanges in 2014 since their volume spiked to crazy high amounts when you compared them to Western exchanges. This is from December 2013, published on Coindesk.

In an online audio interview, Shi said that he would not call OKCoin out and accuse it of manipulating the exchange rate, but he cautioned traders against the exchange, claiming that it “plays both the player as well as the referee”.

In response, Star Xu (Xu Mingxing), CEO of OKCoin who is also believed to be one of the largest bitcoin holders in China, issued a very brief explanation, in which he attributed the discrepancy to the company allowing large traders to trade through its API rather than the webpage interface – an explanation, if true, that may be somewhat hypocritical given that only a couple days ago Xu wrote a statement criticizing the use of “high-frequency trading software”.

Many perceive Xu’s explanation as a cover-up, among them, some Chinese bitcoin celebrities such as Li Xiaolai and Zhao Letian who posted on Sina Weibo agreeing that OKCoin’s data was problematic.

Later, the Chinese government begun to force audits on exchanges and I remember reading about them being told that they will not be allowed to continue operation if their volume was fake. As a result, the volume dropped almost instantly. So, unless people thought the exchanges were faking volume and took the government warning for a cease and desist letter, they were really doing it. The drop in numbers was just too big and too fast and they were being accused of manipulation for more than 6 months before the actual event.

Even if they submit any form of report to the public or anybody that wishes to verify it, that doesn’t also guarantee that the volume quoted in the report will also be genuine and not manipulated like it’s done in the system, so like you said, all these is just a waste of time and it is not exchanges that people should be focused on fighting now, rather all their fight strength and tools should be focused on fellows scamming investors through some of these projects.

If true, exchanges might just be using this as a strategy to boost their existence in the market by hyping their reputation.

the main reasons for the huge fall in volume on Chinese exchanges has been two things based on my observation. first was the fact that Chinese government started adding restrictions to exchanges which drove a lot of traders away from these exchanges to elsewhere. then it was addition of fees which were zero before and these two combined reduced the volume drastically which then was interpreted as "it was fake which is why it dropped!!!" which was not entirely true.

One of the interesting factoids from this is that while futures volume was sneered at, when you cut out the twats faking away it suddenly becomes a lot more muscular and influential over the spot price. I'm sure more than a few moves were purely created to cash in through them.

And I find it weird they've made no mention of alts. There will be plenty of top 10-20 alts that'll have well over 95% fake volume, let alone the shit below.

Many of the exchanges are reporting fake volumes exactly because they are actively trying to scam you. Exchanges that no one has heard of with ludicrous volume, like CoinBene, Coineal, EXX, OEX, and all the others listed in the report - I wouldn't be in the least bit surprised if they all turned out to be exit scams.

Stick with the well known exchanges, and only expose your coins or fiat to the exchange for the minimum amount of time needed to do the trade(s) you want to do.

Exchanges that make up fake volumes are also higher chances they will scam you. Or that their security is so poor that they will get scammed and then run out of coins for your withdrawals. Anyway. Look at this report.
https://threadreaderapp.com/thread/1109114656944209921.html

And look at this reports trusted exchanges:



All of them makes huge sense to me. All are old beside Binance. Binance was just super lucky with its timing and also works good. So is not just luck, but still a lot of luck. You cant fail with any of these exchanges.

At one point or the other, all exchanges must have all done this to gain popularity and probably stop along the line after gaining recognition.

Most of the exchanges you see today didn’t just get there because of the awareness they created or the number of users that believes in them from the beginning, a lot of them usually find it hard to get real attention when they start due to the low market volume they start with, so they will honestly have no choice to fake the volume to attract users, though the action is bad but I don’t think it is for fraudulent purpose, just that it could cause people that judge by volume to invest in bad project.

What's even "scarier" now is that even some of the reputable peer-reviewed journals have come under fire recently for corrupt practices (accepting some kind of kickback to publish poorly-grounded research). MY own country was involved in an embarrassing misconduct scandal recently when they were found out, the journal in question had to retract the study.

I can't remember who suggested it, but putting your research out here on this forum is probably going to get peer reviewed to a higher quality than you could ever pay for externally. Call me naive but the forum admins should look into it;)

I found and read the study by Bitwise. You can see it here: https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5164833-183434.pdf

It's very well done and much more impressive than the study linked to in OP. As you say, they come up with a number of metrics to "measure" which exchanges are largely made up of fake volume, and present those data in a very visually appealing and convincing way. The issue again, however, is with their methodology. There is an obvious conflict of interest with why they have written the study - they want to prove regulation is good so they can get more involved in regulations for their own profit. It would be the same as if a drug company was to fund a study in to how good their new drug is.

The metrics that they have chosen suffer from the flaws as you point out above - they arbitrarily write off a lot of volume because it doesn't follow their predetermined decision of what the volume "should" look like. They don't reveal at all how they reached those predetermined conclusions. They also don't reveal how many different metrics they investigated or looked at before settling on the two or three that perfectly fit the message they are trying to get across.

Their final conclusions do seem fairly accurate, however, and tie in exactly with what mindrust has said in the previous comment. CMC is nonsense, and the top 20-25ish exchanges they list are equally nonsense.

This.

If you take CMC as your source, you'll have bogus numbers. I posted some stuff about this issue before.

https://bitcointalksearch.org/topic/m.50231076
https://bitcointalksearch.org/topic/m.50222937
https://bitcointalksearch.org/topic/m.49998213

The most important Pic you should see:



There isn't a single legit exchange in the first 25 they listed.

CMC is outright SCAM now.

I believe no one will ever  get the right result regarding the true volume of exchange unless these exchanges submit a report.  All in all, it is a waste of time reading this kind of article since this is just mere speculation of someone who thought they are bright enough to calculate the volume by simply doing the formula stated at the OP. 

Believe they are different reports. The article you are talking about is done by Bitwise:
https://www.cnbc.com/2019/03/22/majority-of-bitcoin-trading-is-a-hoax-new-study-finds.html

The one mentioned by OP is done by The Tie.

Seems like reporting the same thing over and over is in vouge.

So was this a different report than the one I see now saying 95% of volume is fake? Did two reports come out within a few days of each other?

For the report that said 95% of volume is fake:
I read an article that described a few bits of how they decided what was real volume and what was fake volume. And let's just say it was ridiculous. First off it is a company that is trying to get an ETF approved and so their goal was to show that a lot more of the bitcoin market is regulated that commonly believed, and oh boy what do you know their results bear out exactly that by saying the 5% regulated volume is the only real volume 

It seemed from the report that certainly some exchanges fake a lot of their volume (which we already knew), but when you look at the methods used to find "fake" volume it's also clear the researchers were just looking for what would fit with their desired goal, which was telling the SEC that most of the market is actually under regulated exchanges and unregulated exchange volumes are faked, so that their ETF would be more likely to be approved. For instance they decided that humans usually only trade small amounts of bitcoin so large amounts of bitcoin being traded were probably fake. Also they said humans tend to trade in even number like 1.9 or 2.0 and not numbers with decimal places so those are probably fake. Which means they removed lots of real volume being done manually by humans as well as probably all bot/algorithmic trading. Basically just coming up with arbitrary ways of removing most of the volume so as to meet their goal of only regulated exchanges having any real volume.

I put these "all bitcoin volume is fake" repots in the same bucket as the report that came out in 2017 that said the bitcoin boom in 2013 was the result of one person or a handful of people, and the report that came out in 2018 that said the 2017 boom was again the result of only a few people.
Basically its utter bullshit.

I suspect you are right.

There's a reason that real scientific studies and papers have to go through months of peer reviews, analyses, editing, corrections, etc, before even coming close to being published, and even then, some fairly dubious stuff can slip through and retractions have to be issued at a later date. In an unregulated space such as this one, anyone can perform any "study" with any methodology they like, and they'll find some news source to publish their findings, or even just via some social media such as medium, twitter or reddit.

There are a number of studies (ironic?) which show that around 60-70% of people only read the news headline, and don't even read the article they are sharing or discussing. It must be a tiny number, then, who click through to the original study the article is discussing, and a vanishingly small number who read the study in enough depth to try to ascertain its validity.

In short, you can publish just about anything and people will believe it.

It's not really something that has only emerged in recent days.

If you are following bitcoin trading for any period of time during the bull market you would have seen very similar allegations being laid out. Whilst difficult to prove, it is very likely that at least some of these accusations are somewhat based and true.

This is a reason why I personally don't feel like TA with volume analysis always makes sense, because of the ease of which wash trading can happen with the help of exchanges internally without the outside noticing. It's also a reason why I do think that judging an exchange solely based on their trading volume is clearly not smart either.

This is a very long problem in this world and in cryptocurrency and in other fields there are fewer games that look cool and can improve their own quality, all with money will be easy to cause noise and spread Fud everywhere, actually it all happened because our response to something is excessive, so they read the conditions to take advantage of such a situation, don't let you belong to such a group, don't respond too much to anything because their goal is to create a noise, so that they can easily manipulate the market .

We actually caused this ourselves, when one of the criteria we normally advise people to use in selecting an exchange is the volume and I really don’t blame them for using that, it doesn’t make them fake, it happens too in normal online business, whereby an ecommerce business on instagram or Facebook buys lots of followers to make them look big already because people don’t want to really associate with the ones with low followers. That is why we have lots of qualified exchanges out there that are not practicing this but not so popular, I don’t have problem with the manipulating the volume provided they are carrying out their legal assignments.