Bitcoin Washout: Who’s to Blame for Up to 95% of Crypto Trading Volume is Wash-Trading
Bitwise Asset Management has applied to the SEC (the Securities and Exchanges Commission) for a Bitcoin ETF (Exchange Traded Fund). A report that was part of this application says that up to 95% of the trades shown by CoinMarketCap (CMC) are known to be false. The report was part of a rule change proposed by Bitwise to the SEC.
Bitwise's report states that CoinMarketCap and similar services use data that they consider fake. The reason for this is that CMC and other, similar services use data from very obscure crypto exchanges.
Bitwise Report Confirms Previous Findings
The report from Bitwise confirms previous reports from both BTI (Bitcoin Transparency Institute) and Tie. Tie is a trading analytics platform, whose reports have rocked the cryptocurrency world. Tie has analyzed data from 97 exchanges, finding around 87 percent of the cryptocurrency trading on them is potentially false.
Of course, these earlier reports erupted into discussions within the cryptocurrency community. Stakeholders from all levels of the cryptocurrency world have been busy arguing about all facets of the findings. There are those who refuse to believe the reports, despite the reports being backed by hard data.
Most of the community, however, has been critical of CMC. They point out the flaws of how CMC gathers and presents its metrics. Many others have started bringing up the price manipulation fears more and more. They have been focusing on how wash trading has been inflating and deflating the market for years with no real effort by any exchanges to limit such malpractices.
A good portion of the community believes that wash-trading should be considered a serious offense for the exchanges that do not police it accordingly. They look at the example of wash trading being illegal since 1936 in the United States and say that Bitcoin cannot be fully trusted until such practices are stopped, and stopped with considerable force.
CMC to Blame or Not?
Many int he cryptocurrency community have been quick to blame CMC. They believe that a website that is among the 500 most visited sites in the world, should police the figures it receives most vigilantly. The community believes that by not doing anything, they are harming the state of the market. The fact that CMC is the face of online cryptocurrency trading by virtue of being one of the biggest websites in the world is enough for many people.
Others see it differently. The CEO of Binance does not think it is so much CMC's fault. He points out that while people like to blame CMC, they are a simple platform that is very open. The fact that they are so open is a problem, as it allows any exchange to report their own numbers. He goes on to say that they just show you data that people have put in their system. In effect, Zhao is saying that the community around CMC is to blame, and not the platform itself.
There are dissenting opinions of course. One of the loudest voices is, unsurprisingly, Ryan Selkis. Selkis is the founder and CEO of Messari, a competing platform. He was quick to jump on the CMC hate bandwagon. He stated that CMC data is mostly wrong and that it is hurting the cryptocurrency market. He said that the daily trading volume, the circulating supply was wrong and even the market cap was wrong.
He was also quick to point out that Messari has alternative benchmarks that are curated more carefully. He espoused the release of Messari's “Real 10” volumes data, with it going live on March 26th. Where the “real” trading volume was shown among the reported trading volume. The difference in Bitcoin was most staggering in the screenshot used. The reported daily trading for Bitcoin was 11 billion, whereas the “Real 10” figure was closer to 310 million.
He has also pointed out that XRP and XLM are both massively overtraded in the reported category meaning there is a lot of manipulation going on in those platforms. XRP had 800 million reported but just 50 million in “Real 10”. XLM had 235 million reported and only 13 million “Real 10”.
Many more people are starting to come to the side of industry leaders such as Selkis. They are demanding form the industry to change and build in methods to stop overreporting and market manipulation. If they do not – cryptocurrency will lose the goodwill it has taken a long time to accumulate.