Half of the volume of transactions carried out in Bitcoin for trading would be false. According to a study, cryptocurrency exchange platforms put forward unreliable figures.
Our colleagues from Forbes have analyzed 157 cryptocurrency exchange platforms. This survey aimed to determine whether the volume of Bitcoin transactions displayed by exchanges for trading was indeed in line with reality. For the media, this is not the case at all.
As of June 14, 2022, Forbes has recorded a daily volume of $128 billion of trading in the world. By combining the data provided by the platforms for the same date, the American media arrives at a result of 262 billion dollars.
” More than half of all reported trade volume is likely to be fake “, explains Forbes in its report.
Note that there is currently no no universal method to determine the volume of transactions carried out in the context of trading. Reputable firms in the sector, such as CoinMarketCap, CoinGecko or Messari, show totally different volumes. Specialists also always specify that these are only estimates.
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Why exchanges would inflate the volume of trading transactions
According to Forbes, many exchanges show unreliable trading volumes. The media indeed suspects certain players in the ecosystem of inflate volumes to simulate high demand. In this way, the exchanges would seek to encourage “ potentially more genuine exchanges”. A high number of transactions reassures potential users.
The platforms would practice wash trading. This practice involves buying and selling the same asset at the same time. The trick inflates trading volumes, but these trades are not real. No cryptocurrency is exchanged through the blockchain during the process. Some fake transactions are also said to be carried out by trading bots. Wash trading complicates the work of analyst firms in the sector, which rely on exchange data.
Forbes specifies that these are mainly unregulated platforms which work out with the actual trading volume. This would notably be the case of BitCoke, an exchange based in Hong Kong and very popular in Argentina. Based on the number of site visitors, the report finds that BitCoke is lying about actual trading volumes. However, the volumes displayed by leading exchanges, such as Binance, also seem exaggerated.
The volume of real transactions would be on the rise
This is not the first time that the volume of Bitcoin transactions has been singled out by analysts. In 2019, a study by Bitwise, an asset manager based in San Francisco, assured that “almost the entire volume” declared by the exchanges was fake. Bitwise then advanced a figure of 95% false volume.
If the Bitwise and Forbes estimates are correct, then we see a sharp increase in the volume of real transactions for trading within three years. As the price of digital assets exploded, more and more users embraced cryptocurrencies. Currently, 200 million individuals worldwide have already handled digital currencies. According to a study by the Boston Consulting Group (BCG), the billion mark will be crossed by 2030.