OKEx Discusses Artificially Inflated Wash Trading Volumes in the Crypto Market After Bitwise Report
In a recent report released by Bitwise, the company showed how different cryptocurrency exchanges perform wash trading activities.
One of the platforms that was mentioned in this report is OKEx. During a conversation with Crypto Briefing, the Director of Financial Markets for OKEx, Lennix Lai, confirm that there is suspicious activity on OKEx.
OKEx Acknowledges Suspicious Trade Activity
During a conversation with Crypto Briefing, Lai said that the exchange would be engaged in wash trading activities, “we would acknowledge that.”
On the matter, Lai said:
“I would say there is a lot of suspicious trade activity on OKEx and we are working on a lot of measures to prevent that stuff.”
The trading behaviour that it is possible to see on OKEx seems to come from the unique fee structure that they use. At the moment, OKEx works with an eight-tier fee schedule in which they charge lower transaction fees to those that trade frequently on the exchange. Those users that have a high trading volume in 30 days can enjoy discounts on transaction fees that incentivize frequent trading.
The first tier includes accounts with a volume below 100 BTC. These users have to pay 0.1% maker and 0.15% taker fees. The highest tier is the 8th level and it allows users with more than 50,000 BTC traded in 30 days to pay 0.02% and 0.05% maker and taker fees, respectively.
During an institutional meeting, the Director of Financial Markets for OKEx said that it is a difficult task to achieve lower fees, and it takes time to build that volume. According to him, Chinese traders perform wash trading activities in some illiquid pairs. As soon as they achieve tier-8 volume it is possible for them to trade and pay lower fees.
In order to prevent this, the exchange has been working on different features. For example, they have increased tick size – the minimum price movement that would make it hard to inflation volumes. In this situation, users would have to use much more resources than before.
At the same time, OKEx has implemented KYC checks on the platform that only apply to withdrawals. Accounts are able to trade without having to verify their identities. In this case, if there is a trader that performs washing trading, it is possible for the platform to close the account, but it is not possible to ban them from creating a new one.
In the future, the intention is to require users to be compliant with KYC regulations and close accounts as fast as possible if they are performing wash trading.
Bitwise mentioned that 95% of the cryptocurrency exchanges listed on CoinMarketCap have faked volumes. The firm has also mentioned that the activity on many exchanges showed “idiosyncratic” patterns. For example, there were some volume sudden changes at certain trade sizes.
It is clear that OKEx is not the only virtual currency exchange affected by wash trading. There are other platforms that have more complicated situations. Lai believes that exchanges such s Binance, Bitfinex, Coinbase Pro or Poloniex have also problems.
According to Lai, some of these platforms have a similar problem as OKEx, they cannot deal with users that perform washing trading activities to reduce the fees that they pay.
Currently, OKEx is the 10th largest digital asset exchange in the market with a trading volume of $696 in the last 24 hours.