Nomics CEO Breaks Down The Question, “Is 95% Of All Crypto Exchange Volume Really Fake?”
Is 95% Of All Crypto Volume Really Fake?
Ever since people started talking about how most crypto volumes were actually fake, the industry has started several interesting discussions. One of them was made by Clay Collins on Coidesk. He analyzed the reports that Bitwise sent to the U. S. Securities and Exchange Commission (SEC). Clay Collins is the CEO of Nomics, a data company which is focused on the blockchain market.
According to him, two main claims were made by the company, that only 10 exchanges had an actual volume and that 95% of the whole market volume was actually fake.
One of the first aspects noted by the analysts was that eight out of ten crypto exchanges which were identified as “good actors” by Bitwise had something in common: they provided historical trade data in a completely transparent way. If you are transparent, it is more likely that you will not fake trade volumes.
Almost all of the “bad actors” did not provide the data, too, which makes the whole situation clearer: if you are not transparent, it is more likely that you will have fake volumes and wash trading. The more data is collected, the more likely you are caught if you engage in bad activities.
However, despite not completely disagreeing with the methodology of the study and its findings, Collins affirmed that he was surprised by the fact that the crypto community on social media was actually so ok with the report.
Also, he criticized the community for believing that the reports, which only took BTC/USD and BTC/USDT pairs into account, could be used to determine that the whole industry had clearly fake volumes.
According to him, the reports are simply too large and too global to be taken at face value, so there is a need to have a considerably more nuanced discussion about this report and what it means for the crypto industry.
The Main Critiques To The Report
The first point cited by the expert was that this was, most of all, a marketing document, which would make it have an “inherent bias” Also, he criticized the report for using the “base 10 bias” and affirmed that the conclusions were are not audited by any third party.
You can either take the information provided by Bitwise and believe in it or you can ignore it. Bitwise has already affirmed that the company is focused on having a better and clearer methodology in the future, though.
He also cited that there is a big over-extrapolation in the report as if the conclusions are stuck in time. Since the company does not specify its methodology, no third party can be able to update this list, so the company remained in control of the information.
This means that the people described as the good actors by the company can actually become problematic ones in the future and some bad actors might clean their practices after being discovered.
Also, the conclusions only apply to the Bitcoin market, specifically to USD and USDT pairs. The analysis was made specifically for the Bitcoin ETF, make no mistake about that. It does not say a lot about the whole altcoin market, though, despite what people seem to believe.
Finally, the public response was considered to be unfair because many exchanges were not examined and readers may think that only the 10 good ones are able to provide good services, while many exchanges were not even cited in the report.
The main problem comes from having a restricted volume analysis and trying to use this result as something that could define the whole market. Bitwise may have found interesting aspects of the market, but they are much more limited than they originally seemed to be.
Basically, this changes the reliance on one centralized provider, CoinMarketCap, to another, Bitwise. Bitwise is just taking the place of CMC. The crypto industry needs more decentralization in order to become better, not to just put one company in the place of another.
With more open source methodologies, the future can be considerably brighter than it is right now since people will have more power over the information.