A recent study conducted by Bitwise Asset Management has revealed that as much as 95% of spot bitcoin (BTC) trading volume has been “faked” – as it’s being inaccurately reported by loosely regulated or completely unregulated cryptocurrency exchanges.
1/ New Research from us @BitwiseInvest.
As part of 226 slides presented to the SEC on our ETF filing, we did a first-of-its-kind analysis of *order book data* from all 81 exchanges reporting >$1M in BTC volume on CMC.
TLDR: 95% of reported volume is fake but LOTS of good news! pic.twitter.com/TuXLlDCRyP
— Bitwise (@BitwiseInvest) March 22, 2019
Founded in 2017, Bitwise Asset Management is a privately-held, San Francisco-based crypto research firm that also serves as a “trusted partner to individuals, wealth managers, family offices, investment managers and institutions” in making business-related decisions in the digital asset industry.
Only $273 Million In Bitcoin Spot Trading Volume
In its extensive report, the research team at Bitwise analyzed the world’s top 81 crypto exchanges, in terms of trading volume, and found that financial data reported by CoinMarketCap (CMC), a leading crypto data provider, had been artificially inflated. Researchers at Bitwise claim that CMC had reported a combined $6 billion in average daily trading volume. However, the results of a study commissioned by it revealed that only $273 million of CMC’s reported BTC trading volume was “legitimate.”
Commenting on the reportedly inaccurate data, Matthew Hougan, the global head of Bitwise’s research division, remarked:
People looked at cryptocurrency and said this market is a mess; that’s because they were looking at data that was manipulated.
In its detailed investigation, which was compiled and submitted to the US Securities and Exchange Commission (SEC), Bitwise noted that most of BTC’s reported spot volume is fake, and that listing fees are likely the motive behind it, as they can reach millions. The real spot volume was found to be of $270 million, and 10 crypto exchanges make up almost all of that volume. Most of these are regulated cryptocurrency trading platforms.
According to Bitwise’s management, the crypto research firm performed “a first-of-its-kind analysis of order book data” from all 81 digital asset exchanges reporting Bitcoin trading volumes of more than $1 million per day on CMC.
Arbitrage Between 10 “Real Exchanges” Has “Improved Significantly”
As mentioned, Bitwise noted that the “total daily [bitcoin] spot volume” is estimated to be at around $270 million – which is “95% less than reported” by CMC. Moreover, Bitwise’s team pointed out that only 10 digital asset exchanges have Bitcoin trading volumes greater than $1 million per day. These include Binance, Coinbase, Kraken, BitFlyer, itBit, Bittrex, Poloniex, Bitfinex, Bitstamp, Gemini, and Circle Pay.
In order to confirm Bitwise’s reported figures, the crypto research company wrote that users can check information posted on bitcointradevolume.com. Going on to report some “good news,” Bitwise revealed via its official Twitter account:
Arbitrage between the 10 real exchanges has improved significantly. The avg price deviation of any one exchange from the aggregate price is now less than 0.10%! Well below the arbitrage band considering exchange-level fees (0.10-0.30%) & hedging costs.