95% of Bitcoin’s Volume is Faked, Report Finds

95% of Bitcoin’s Volume is Faked, Report Finds

Bitcoin in particular, but really the entire cryptocurrency ecosystem, has a problem with faked volume. A recent report has shown that in upwards of 95% of the volume reported by websites like CoinMarketCap is actually fake. Given that news outlets commonly cite the volume figures on CMC and investors treat them as real, the revelation that they’re inaccurate is creating a lot of discussion about how large of a problem this is and what can be done to solve it.

The Real Bitcoin Volume

According to Bitwise Asset Management, the creators of the report, Bitcoin’s real volume is only about 5% of what it’s reported to be. At the time of their report that meant volume of about $270 million, not the reported $6 billion. They claim that a vast majority of that volume comes from just a few exchanges, mainly the ones who will be most familiar to anyone in crypto, Binance, Coinbase, Kraken, etc.

While not everyone has the tools necessary to sort the fake exchanges from the real ones, there is now a website which lets you easily determine what Bitcoin’s real volume is. Bitcoin Trade Volume only shows volume reports from reputable exchanges. This makes it easy to figure out how much trading is actually going on.

Hopefully in the future this website, or another like it, will report on other popular coins like ETH and XRP so that it’s easy to see what their real trading volume is.

Why This Matters

This revelation of fake volume, which looks obvious in retrospect, is incredibly important because the false volume numbers have been used so extensively by investors, analysts and of course the media. Among many other smaller problems, there are two glaring issues with this.  

  1. It’s difficult to tell which coins are dead. Even with 95% of its volume being faked, Bitcoin is still doing an impressive quarter of a billion dollars a day in trading. However, smaller coins might show almost nothing but faked volume. What appears as a respectable $10,000,000 a day might be only $50,000 or less in volume. This gives investors a false idea of how well a coin is doing.
  2. Coins are paying to get listed on false exchanges. When an exchange fakes its volume and makes itself look larger than it is, it’s going to attract projects that will pay to get listed. These fees may range in the millions of dollars. Once it is listed, however, a project might find out that it’s receiving little actual volume and has paid all that money for nothing.

The Way Forward

Unlike many problems in crypto, the solution to fake volume is actually pretty simple. Figure out which exchanges are reporting fake volume and stop adding their feeds to aggregators and coin ranking websites. That’s really all that needs to be done.

In time the fake exchanges will go out of business, the real ones will attract more traders than ever before and the ecosystem will thrive. That’s something that everybody in crypto would love to see.

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