HitBTC, CoinGecko Team Up In Order To Fight Fake Volumes and Wash Trading Despite Troubles
Most of the Bitcoin trading volume in the crypto market is actually fake. Recent research made this year appointed that over 90% of all crypto transactions made on centralized exchanges (the research did not look into the P2P exchanges, so they probably fare better) is not real, being constituted of wash trading instead.
Now, the Hong Kong-based HitBTC has decided to enter a partnership with CoinGecko, a cryptocurrency data aggregator, in order to fight fake volumes. There have been several claims that HitBTC was faking crypto trading volumes recently, so this action was mostly done in order to clean up its reputation a bit.
CoinGecko will help the company in order to create a Trust Score, which will be used as a volume estimator that will determine how much you should trust the volumes of a certain exchange.
HitBTC Is Being Accused By All Sides
The announcement happened after the company faced a prolonged downtime. Together with the announcement that the services would be online, the company affirmed that its goal was to create more transparency and to fight against the fake volumes that plagued exchanges.
This was, obviously, considered ironic by many people in the crypto community. Most of the companies which are accused of having fake volumes actually fake the volumes themselves. Wash trading is not really useful for their users, only for them, as they can see clearly larger than they really are.
Because of this aspect, not many people were very enthusiastic. The solution to having less wash trading is to simply not do it. One reason why the exchange might have issues this statement would be because some users are already concerned that it might not have enough liquidity.
Liquidity, as you may know, is vital for any exchange to thrive. If liquidity is actually too low, the trades will take too long and there is a big chance that you may end up losing money if you are trading and prices are changing a lot, something that is pretty common in the Bitcoin markets.
There are currently two pieces of research which may indicate the problem that HitBTC is facing. One of them was made by Zerononcense’s ProofofResearch and the other by Cointelligence.
The ProofofResearch piece was originally published on May 18. According to it, HitBTC only had 350 BTC remaining. This way, users were not able to actually withdraw their BTC funds if they wished. This happened because, according to the study, the exchange was swindling the users.
According to the other research, published on May 24, almost all of the volume in the exchange was actually fake and that it was mostly wash trading without having much money.
Since then, the exchange has responded to the accusations made by the first piece of research. They affirmed that they only used the numbers from their hot wallets and that they were not completely representative of the total of the assets held by the company at this moment. HitBTC also affirmed that the company was not doing anything illegal with the funds of the clients and that the situation was fully under control.
Discovering Fake Volumes: A Real Solution?
CoinGecko’s solution is being marketed as something that could show that HitBTC is innocent from the accusations. It will use an Average Daily User Trading Volume [ADUTV] which will be based on the median volume of ten exchanges in order to determine fake volumes.
The CEO of the company, Bobby Ong, has affirmed that the new Trust Score will help the customers in order to determine how they will invest. This way, they will be able to choose only the exchanges that they believe in the most if they want to invest and avoid the bad ones.
This partnership will be important for HitBTC’s survival. If the company can prove that its game is clean, it will possibly get some of its status back as a solid exchange instead of keeping going down the road.