Are more than half of all Bitcoin trades fake?

Bitcoin represents 40% of the $1 trillion in crypto assets outstanding, according to Forbes’ director of data and analysis. “An estimated 46 million American adults already own it, according to the New York Digital Investment Group…”

“But can you trust what your crypto exchange or e-broker reports on trading the most important digital currency?”
One of the most common criticisms of bitcoin is pervasive wash trading (a form of fake volume) and poor monitoring across exchanges. The US Commodity Futures Trading Commission defines wash trading as “entering into, or pretending to enter into, transactions to give the appearance that purchases and sales have been made, without incurring market risk or changing the trader’s market position.” The reason some traders engage in wash trading is to inflate the trading volume of an asset to give the impression of rising popularity. In some cases, trading bots execute these wash trades in tokens, increasing volume, while insiders amplify the activity with bullish remarks, driving up the price in what is effectively a pump and dump scheme. Wash trading is also beneficial to exchanges because it allows them to appear to have more volume than they actually do, potentially encouraging more legitimate trading.

There is no universally accepted method for calculating bitcoin daily volume, even among the industry’s most reputable research firms. For example, at the time of writing, CoinMarketCap puts the last 24-hour trading of bitcoin at $32 billion, CoinGecko at $27 billion, Nomics at $57 billion, and Messari at $5 billion….

As part of Forbes research on the crypto ecosystem using 2021 data, we ranked the top 60 exchanges in March. Recently, we took a deeper dive into the bitcoin trading markets… Our study evaluated 157 crypto exchanges worldwide. Here are our main findings:

– More than half of all reported trade volume is likely to be false or non-economic. 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 you would get by taking the sum of self-reported volume from multiple sources….

– The biggest problem areas regarding fake volume are firms that sell large volumes but operate with little or no regulatory oversight that would make their numbers more credible, especially Binance, MEXC Global and Bybit. Combined, the less regulated exchanges in our study account for about $89 billion of real volume (they claim $217 billion).
Forbes adds that their report “builds on top of the important work done by other digital asset researchers such as Bitwise, which estimated in a March 2019 white paper that 95% of CoinMarketCap’s bitcoin trading volume was fake and/or non-economic.”

Their article includes some other interesting findings, including an observation that Tether “continues to be a dominant player in the crypto trading economy, especially when it comes to trades against bitcoin. Its current market cap is $68 billion, despite questions about its reserves.”

Thanks to Slashdot reader rrconan for sharing the article…