95% of BTC trading volume is a fake and other interesting insights from Bitwise report

A recent report published by Bitwise, San Francisco-based crypto research company, revealed that — OMG! — 95% of the reported Bitcoin trading volume is “fake and/or non-economic in nature”. Well-well, who could’ve thought?

After a massive negative response to my article about Bitfinex and Tether manipulating the market, here comes another piece of sweet news. The report is 226-pages long and I doubt that anyone would have enough patience to look through it. So I’d like to save your time and highlight the most interesting aspects that they have found.

How orders are executed on real exchanges

The report compares the trading pattern at real exchanges with suspicious ones. Here’s what the trading history at a real exchange (Coinbase) looks like:

The trading history at CoinBase (the right column)

This is the graph of the most popular trading pair BTC/USD and it looks pretty natural. Someone sells, someone purchases. The green orders prevail and there is obviously no suspicious pattern in the orders’ execution.

Also, on the left, you can find some orders with nice round numbers — 0.1 BTC and 0.01 BTC. This is perfectly human behavior (we all love beautiful numbers).

How orders are executed on suspicious exchanges

Now let’s take a look at the trading history at Coinbene (500k monthly visits — SimilarWeb, $433 million daily trading volume — CoinMarketCap).

The trading history at Coinbene (the right column)

No round numbers, the ‘sell’ orders follow in the same second right after the ‘buy’ ones at the same price: green-red-green-red. Sell crypto from one account and buy from another, create trading volume out of the thin air and charge unbelievable fees for listing.

(I’m not sure how Bitwise managed to capture such numbers, though. I’ve checked Coinbene myself and everything seemed pretty normal to me there, just like with Coinbase. However, I checked it a few days after the report was published, so they may have taken some actions. Also, I haven’t found any USD trading pairs, only USDT, which is also strange.)

More reasons for suspicions

Moving on with the report, here are some other signs of suspicious exchanges.

  • Trading only big amounts. This is true for Coinbene, BTW. Typically, we humans set orders for small sums along with big ones. At Coinbene, you will hardly find an order that would be smaller than 0.5 BTC which makes up $2,000 at the time of writing.
  • Multiple hours and even days with zero volumes. RightBTC which claims to have the trading volume 4 times as big as Coinbase, has many gaps with zero volume.
RightBTC with $100M daily trading volume has multiple gaps
  • Monotonous trading volume. CHAOEX has suspiciously steady hourly volumes: no spikes, no cavities. You can hardly meet such consistency on exchanges with real users and real volumes.
The trading volume is too monotonous, it can’t be this way on an exchange with real human transactions
  • Too smooth histograms for trade size. These histograms were created with the help of a special program developed by Bitwise. They display the distribution of trades by volume (0–0.1 BTC, 0.1–0.2 BTC, etc). See how spiky and uneven they are on “normal” exchanges and how smooth they are on suspicious ones. Moreover, on faithful exchanges, the spikes coincide in time, which shows that the volumes are real.
Trades are distributed too smoothly on exchanges with fake volumes

Summing up

The cryptomarket is made of lies and manipulations. Big projects conspire to make money on traders, exchange platforms fake their indices to make money on crypto projects (have you seen the prices for listing your token anywhere with a substantial trading volume?).

Why am I still here? Because I believe that even after all this bubble finally crashes, the seeds of the new awesome technologies will break through the ashes and maybe even change the world for the better. I’m not a blind fanatic, but a realist.

P.S. Here’s the final word from Bitwise:

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Blockchain and cryptocurrency marketing specialist

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