Much Crypto Data Is ‘Fake’ – Groundbreaking Research Issues Dire Warning As Price Of Bitcoin, Ethereum, BNB, XRP, Solana, Cardano, Shiba Inu & Dogecoin Crash
MIAMI, FLORIDA – APRIL 8: A bitcoin logo is seen during the Bitcoin 2022 conference in Miami Beach … [+]
The crypto bleeding continues.
Over the past week, the bitcoin price has dropped 6.2% of its value, hitting a low of just over $20,000. Altcoins are bleeding too. Ethereum’s price fell 4.1%, Cardano
Meanwhile, some crypto numbers you see every day are not as real as you might think.
There have long been concerns about the accuracy of crypto data due to a lack of standardized reporting and regulation, but there wasn’t much insight into how bad it is. Well, until now.
Javier Pax, director of data and analytics at Forbes’ digital asset arm, examined 157 crypto exchanges and found an extreme mismatch between reported and actual bitcoin trading data.
Long story short, his analysis estimated that over half of all bitcoin trades are either wash trades or simply fake:
“More than half of all reported trading volume is likely to be fake or non-financial. Forbes estimates that global daily bitcoin volume for the industry was $128 billion as of June 14. That’s 51% less than the $262 billion that would have been obtained by take the sum of self-reported volume from multiple sources.”
What’s happening here?
Zoom out
There are two culprits to blame for this stark discrepancy in crypto data.
First and most obvious, unregulated exchanges that outright fake trading volume data.
It has to do with the fact that many crypto websites rank exchanges based on pure trading volume. So sprucing up volume numbers here and there is a tempting shortcut that can immediately give them more visibility and bring in more customers.
This malpractice came into the spotlight in 2019 when Bitwise Asset Management revealed that 95% of trading volumes reported by exchanges on CoinMarketCap – the world’s #1 crypto data website – were fake.
And the smaller the exchange, the more drastic figure massage is typically. Pax’s investigation found that the biggest data discrepancies were among lesser-known and smaller exchanges. Their actual volumes turned out, get this, 80-99% lower than reported. Which means that such exchanges falsify almost all of their bitcoin trades.
The other culprit is whale investors who open and immediately close their positions for no financial reason. In industry jargon, it’s called laundry. It is an illegal practice that deep-pocketed traders exploit to create a false impression of demand and manipulate markets, which can be extremely effective in pump and dump schemes.
Looking forward
Pax’s analysis only covers bitcoin. So on the one hand it doesn’t tell us much about the entire crypto market. On the other, it does.
If there is so much false data surrounding such a well-known cryptocurrency, it doesn’t take much imagination to realize how much of the data is made up of smaller cryptocurrencies; the data that many investors take at face value.
The takeaway?
As long as the crypto market is so unregulated, take all crypto data with a big grain of salt. Because, apparently, the crypto you proudly hold or the exchange you entrusted it with can be liquid like a rock.
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