OKCoin has changed the way it's calculates transactions, seemingly doubling its volume traded overnight.
The actual volume of trades at OKCoin has not actually seen a dramatic increase. The reason the reported OKCoin trade volume doubled was because OKCoin changed the way it calculates trades in order to, according to them, come into line with the “industry standard[.]”
Previously, when one bitcoin was sold (and subsequently bought) on OKCoin, it calculated the transaction as “one bitcoin” in the exchange's total volume. Now, it is counted twice: once when a customer sells it and once when a customer buys it.
Functionally, this makes virtually no difference. It only makes OKCoin appear larger than it did previous to the update, without any actual growth taking place.
OKCoin announced that it had made the change on Reddit, shortly after the update. OKCoin is quick to point out that other Chinese-based exchanges Huobi and 796 calculate their volumes in the same way. A claim some Redditors doubted until OKCoin posted (Chinese language) conversations proving as much.
While that does appear to be the standard operating procedure for Chinese based exchanges, that does not seem to be the case for Western exchanges. Executives from both BitMex and BTC.sx were quoted in Coindesk as not adopting to that counting method themselves, with BitMex CEO Arthur Hayes going as far to say “[the method] paints a false picture of exchange liquidity.”
OKCoin also stated that the method originated outside of the Bitcoin industry, with Chinese based future commodity trading being counted twice for volume. We have, at press time, been unable to confirm if that is true.
As for what this means for the Bitcoin space: it seems to only matter to the hardcore bitcoin day traders. The reported volume of exchanges is just that, the reported volume. It makes no difference how OKCoin reports its volume, so long as it is reported consistently and transparently. They put it inline with their competition, likely because they wanted the comparative size of the three major Chinese exchanges to be visibly apparent to potential customers.
Regardless of if this is the “right” way to count coins or not, it only makes a difference for the Bitcoin day traders that worry about things like exchange volume for their leverage and futures bets. OKCoin also announced 20x leverage when it announced the changes to how it calculates total volume.
Leverage is when an investor bets more than they have, in this case on Bitcoin's future price. Using this method, they can greatly increase their gains. However, the flip side is also true: it can results in quick and massive losses. Having a high volume means that there are more likely to be investors willing to buy losing bets that can be used to pay the “winners.” If there aren't enough losers to pay the winners, the exchange must cover the differences or (as is more often the case in Bitcoin exchanges) the difference is socialized and winners get less than they are supposed to. A higher volume in the futures market makes this less likely.
One possibility is that the change in how total volume is calculated could have something to do with OKCoin wanting to make their exchange more attractive to investors that utilize leverage, even though the actual volume hasn't changed. We have sent a request for comment to OKCoin and will update this space as necessary.
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G+1Pinterest reddit Upvote Downvote submit inShare 2OKCoin has changed the way it’s calculates transactions, seemingly doubling its volume traded overnight.The actual volume of trades at OKCoin has not actually seen a dramatic increase. The reason the reported OKCoin trade volume doubled was because OKCoin changed the way it calculates trades in order to, according to them, come into line with the “industry standard[.]”Previously, when one bitcoin was […]