Bitwise Claims 95% Of Spot Bitcoin Exchange Trading Volume Is Suspect, Bad News For The ETF
The current situation is not seeming great for the crypto market as Bitwise Asset Management, a crypto index fund provider has recently claimed that 95% of the volume of unregulated crypto exchanges appears to be either fake or “non-economic in nature”.
Bitwise has also reported this data directly to the U. S. Securities and Exchange Commission (SEC), which is currently determining whether to accept the Bitcoin exchange-traded fund (ETF) or not. The news is certainly not good, as it will make it seem like the Bitcoin market is being manipulated, which is currently the main concern of the SEC.
According to the company, most of the volume of $6 billion USD traded in Bitcoin every day across spot markets is simply fake or wash trading. CoinMarketCap (CMC) is being accused by the company to provide a largely incorrect data, which makes the market seem like it is considerably bigger than it actually is.
The company affirms that the volume of $6 billion is a lie and that the reality is closer to $273 million USD daily.
How Did The Company Reach This Conclusion?
In order to draw these conclusions, the company used sites like Coinbase Pro, which is fully regulated. By using these “trusted” sources, the company sought to understand the trading patterns in order to understand them better. For instance, there needs to be an influx of buy and sell orders for a healthy market.
Coinbase Pro’s numbers are characterized as being “natural” and humanlike. Coinbase reported trades of $27 million USD in a day. Coinbene, in comparison, had very suspicious patterns. The exchange had an “implausibly perfect” alternating pattern for green and red trades (buy and sell orders).
Also, buy and sell orders looked programmed and offset each other, which led the analysts to believe that there was something wrong with it. When comparing the spread of each company, Coinbene had 18 times more volume than Coinbase Pro with a spread which was 3400 times larger, which simply did not seem right at all.
Another important point is that the suspicious exchanges had a consistent volume 24/7 while the ones which were considered to be normal had a volume which corresponded to waking and sleeping hours, which would be expected. Data from 81 exchanges was gathered in order to determine the volume.
Bitwise’s Head of Global Research, Matthew Hougan, it is not surprising that most volume is fake, as people in the industry know that for a long time. However, now is the first actual time in which there is data to prove this.
The Issue For The Bitcoin ETF
Unfortunately, if the SEC believes this data, the Bitcoin ETF may be affected. The main reason for the SEC not approving the ETF yet is because it does not trust the market to be protected against manipulation. Because of this, it would not be too surprising if the SEC would be cautious after receiving this data.
Another trading analytics platform, The Tie, has also reported that 90% of the crypto exchange’s volume is fake, which does not help in the situation.