Categories: Bitcoin Business

Research: 95% of Bitcoin (BTC) Trading Volume Is Fake

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Trading volumes on cryptocurrency exchanges are largely an illusion. That’s according to a research report by Bitwise that accompanied its recent Bitcoin (BTC) ETF filing with the SEC.

1/ New Research from us @BitwiseInvest.

As part of 226 slides presented to the SEC on our ETF filing, we did a first-of-its-kind analysis of *order book data* from all 81 exchanges reporting >$1M in BTC volume on CMC.

TLDR: 95% of reported volume is fake but LOTS of good news!

— Bitwise (@BitwiseInvest) March 22, 2019

In the report, which includes 226 slides that break down the order book data from all exchanges that report more than $1 million in daily trading volumes on CoinMarketCap, Bitwise had the following takeaways:

  1. 95% of reported BTC spot volume is fake.
  2. Likely motive is listing fees (can be $1-3M)
  3. Real daily spot volume is ~$270M
  4. 10 exchanges make up almost all of the real trading volume.
  5. Majority of the 10 are regulated.
  6. Spreads are <0.10%. Arbitrage is super efficient.

Notably, Bitwise claims that only 10 cryptocurrency exchanges have actual volume, including major names like Binance, Coinbase, Kraken, Gemini and Bittrex.

The data set does not include Korean exchanges or those under $1 million in ADV. (Bitwise)

Of the ~$6 billion reported daily volume for Bitcoin, Bitwise claims that the actual average daily volume stands at roughly $273 million. Bitwise used a number of data-driven tests to assess whether exchange volume is faked, including looking for exchanges that are dominated by large block trades and exchanges that have volume spikes that align perfectly due to all trades being in the same market.

This report comes in response to the SEC’s concerns over Bitcoin data quality and price manipulation. Bitwise’s new ETF notably differs from all previously filed Bitcoin ETFs as it would rely on regulated third-party custodians to hold its physical Bitcoin and would pull price data from a large number of certified crypto exchanges, to reduce the potential for price manipulation.

Bitwise’s findings mirror past reports, including a December 2018 study by the Blockchain Transparency Institute that found at least 80% of CoinMarketCap’s top-25 BTC pairs volume is wash trading, concluding, “These exchanges continue to use these strategies as a business model to steal money from aspiring token projects.”

Top-25 BTC pairs via CoinMarketCap (BTI)

While the overall volume figures weren’t necessarily encouraging, Bitwise also showed that — adjusting for USDT/USD price fluctuations — the value of BTC/USD corresponds to the value of BTC/USDT — potentially demonstrating a lack of market manipulation. Additionally, a surprising amount of the real Bitcoin trading volume can be sourced to the U.S., another finding the SEC may view positively.

Bitcoin is currently up 0.3% on the day to $ 4,037, giving the leading digital currency a $71 billion market cap — roughly 50.7% of the $140 billion crypto market.

Disclaimer: This article’s author has cryptocurrency holdings that can be tracked here. This article is for informational purposes only and should not be taken as investment advice. Always conduct your own due diligence before making investments.


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