Chainalysis Report: With A ‘High Degree of Certainty,’ BitForex is Faking Its Trading Volume


Chainalysis has released on Friday a report that’s saying the crypto exchange BitForex may fake its trading volume.

The report also presents how for every Bitcoin (BTC) that has been recorded on-chain from January to November, BitForex claims trades of 40,000 Bitcoins, which is comparable to the average of major exchanges, at about 6 Bitcoins being traded to one on-chain.

BitForex Didn’t Comment on the Report. Philip Gradwell, the Chainalysis chief economist and the report’s compiler said:

“There should be a relationship with the bitcoin moving onto the exchange and how much it is traded.”

The report was shown at the New York Chainalysis Links conference and didn’t receive any response from BitForex.

New Tools for Tracking Trading Volume Suspicious Activity

The report made by Chainalysis comes after entities in the crypto world have put more pressure on exchanges suspected to fake trading volume. There are new tools and metrics to identify fakers. More than this, a report made by Bitwise Asset Management and presented in March at the Securities and Exchange Commission says that almost 95% of the reported Bitcoin trading volume doesn’t present the situation accurately. This means BitForex’s fake trading volume is only a small part of a much bigger whole.

The ratio reported by the company is very high when compared with one of 10 other exchanges, when its Bitwise 10, the leading exchanges’ metric, the volume is being analyzed. While the average ratio is 6:1, BitForex’s is 40,000:1.

Exchanges Gain More Popularity When Their Trading Volume is Ranked High

Gradwell said in an interview that exchanges become more popular and gain new users when their trading volume is highly ranked. Just like with search engine optimization (SEO), where digital strategies are being used for websites to rank higher on Google, the exchanges are increasing their visibility with a high-ranking trading volume. This is what determines them to manipulate their data. Here’s what Gradwell had to say further about the matter:

“It’s really going to degrade the trading experience. If you’re a new entrant to crypto, and you think you’re going to a popular exchange – that actually has faked volume – it’s not going to be a very liquid exchange. You’re not going to get the best prices or be able to buy or sell quickly.”

BitForex Failed 5 Out of 6 Tests Conducted by Alameda Research

Market manipulators, researchers, and investigators are choosing BitForex because it has comparably lax standards, as it practices transaction mining. The Chainalysis report is not the only one saying the company is issuing fake reports, seen in July, Alameda Research made an exchange volume report on 48 crypto exchanges, and BitForex failed 5 out of 6 of its tests. Chainalysis looked in 2018 at 12 of the exchanges suspected to fake trading volume, when it also examined Huobi and Bithumb. After the final report, the ratios in volume started to have more consistency, just like the ones of market leaders.

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