A report on cryptocurrency exchanges has thrown up some shocking revelations about the massive amounts of wash trading going on within the industry. Investigative body Blockchain Transparency Institute (BTI) monitored the top 25 trading pairs of the top 25 exchanges by reported volume. It found that an astonishing 87% of all the reported trading volume was fake, mostly down to wash trading – a practice illegal in traditional asset trading since 1936. Wash trading occurs when the same seller sells then immediately rebuys the same asset, creating the impression of volume when in fact there is none.
Coinbene Tops (Then Bottoms) The Charts
BTI spent three months investigating the exchanges and, using several trading tools and metrics, compared manipulated and fake volume on their platforms to genuine trades, uncovering widespread wash trading, with barely believable results. A headline example of this is the exchange Coinbene, which topped BTI’s reported 24-hour trading volume charts with an alleged $222.8 billion. BTI’s investigations on Coinbene’s trading activities resulted in identifying 99% false volume, putting their real volume somewhere around $2.73 million, which would be enough to knock them out of the top 100.
Another ten exchanges experienced 1% real trading volume compared to reported, equalling 44% of the sampled exchanges. Other big names that were accused of wash trading included Huobi (74%) and HitBTC (75%).
Bitfinex and Binance Get the All-Clear
The only two exchanges to come out with any credit were Binance and Bitfinex who, according to BTI, were the only exchanges “not to be grossly wash trading their volume”. This is particularly interesting given the Bitfinex/Tether rumors that have dogged the market in 2018. BTI were particularly harsh on OKEx, who interestingly last month cut 30 trading pairs from their platform, after they found to have wash traded “almost all” of their top 30 traded coins. As a result, they placed OKEx on their ‘Exchange Advisory List’, which features 56 exchanges that they are sufficiently concerned about to advise projects to “contact us before paying listing fees to any of these exchanges”.
The Worrying Trend Continues
The news of such widespread wash trading will not go down well with the SEC who view market manipulation as a chief reason why Bitcoin is not yet ready for an ETF. With market participation having fallen off a cliff this this year compared to 2017 it’s no surprise to see less scrupulous exchanges falsifying volume to keep afloat, but the sheer scale of the manipulation is worrying for investors and projects alike.