Fake volumes are a problem at crypto exchanges across the spectrum. This practice is seemingly used to push a crypto exchange brand up the ranks of Coin MarketCap’s exchange volume rankings, providing more visibility to potential crypto traders and investors. BitWise figured out the sneaky scheme and put together a report to warn investors.
According to Bitwise, the exchanges that skirt the defined lines between the “real” and the “fake” were HitBTC, Huobi, and OKEx.
The firm’s March report addressed to the US Securities and Exchange Commission highlighted 10 exchanges with real volume. However, following public requests, the firm in a subsequent report highlighted three exchanges with “meaning volume”.
Firstly, the report analyzed the trade volume percentage on an exchange, depending on a specific trade size over a defined period. Citing this trade size histogram for OKEx, the report stated that the same is “notably suspicious,” as it had no absolute spikes and an “atypical rise” in volume from 1-6 BTC. The exchange’s trade distribution also showed an “unusual” tail from 6 Bitcoins.
In terms of volume spikes from 28 April to 5 May, the graph depicted constant hourly volume which according to Bitwise, “betrays none of the natural rhythms of the reference exchanges.” The “reference exchanges,” are the 10 exchanges that Bitwise has contended as having “real volume.”
If you happen to be scoring at home this opens up several lines of questions that could serve to potentially crash the markets in a similar way to Mt. Gox, should the truth eventually be found out.
Our advice: stick to the top four or five exchanges and avoid the potential for a ‘lose all your money’ type of event. Cryptopia we are looking at you.