
Most Bitcoin Trading Faked by Unregulated Exchanges, Study Finds - JumpCrisscross
https://www.wsj.com/articles/most-bitcoin-trading-faked-by-unregulated-exchanges-study-finds-11553259600
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nullc
The mention of 81 exchanges left me thinking: If none of the trading was fake,
but then I created a single exchange literally named "ScamCo Faketrading
Exchange" which claimed 1 petatrades per second were happening on its
platform, then would this analysis say that >99% of all trades were fake?

I think it would.

I don't think any of the exchanges that I could have named off the top of my
head were on their naughty list (paywall is keeping me from loading it again
to check), ... so it seems to me that this report might be a bit overstated.

~~~
mikeash
The actual volumes on different exchanges are not anything close to that
disparate, so while your hypothetical does raise a real way that such a claim
could be misleading, it has nothing to do with the actual situation at hand.

~~~
nullc
The presentation (linked in another comment here) lists a number of exchanges
which they believe are presenting fake data:

CoinBene, RightBTC, CHAOEX, IDAX, LBANK, BitForex, Exrates

I don't think I've heard of any of these, and there are zero hits in my email.

They go on to identify pretty much every exchange I've ever seen discussed on
HN (for example) as having legitimate volume-- coinbase, bitstamp, bitfinex,
gemini, ...

I think the headline should instead be "coinmarketcap volume claims are
nonsense" \-- which I think most people in the bitcoin space would say "well,
duh". At least my view purpose of coinmarketcap and similar sites seems
largely to direct people to the latest token pumps, as evidence by the absurd
"market caps" they display for illiquid pre-mined tokens...

What set off alarms for me is that there is no way that you get to 81
exchanges without including some really sketchy or obscure stuff.

But a site that wants to list sketchy tokens needs to include the sketchy
exchanges because for the most part the non-sketchy exchanges won't list them.

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thinkmassive
Bingo. I started using Messari/onchainfx and it’s a much better alternative.

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andrewla
Here's the slide deck presented by Bitwise, who did the study:
[https://www.sec.gov/comments/sr-
nysearca-2019-01/srnysearca2...](https://www.sec.gov/comments/sr-
nysearca-2019-01/srnysearca201901-5164833-183434.pdf)

Another summary article (non-paywalled) from CNBC:
[https://www.cnbc.com/2019/03/22/majority-of-bitcoin-
trading-...](https://www.cnbc.com/2019/03/22/majority-of-bitcoin-trading-is-a-
hoax-new-study-finds.html)

EDIT: This is a very slick presentation. The weakest point I saw was a bit of
handwaving around the key signing ceremony, specifically about how sharded
keys are distributed. It's odd that they go into such detail about how to
provision a clean laptop but then just sort of say "well, take your private
key and mask it into seven pieces".

~~~
andrewla
Page 61 has the 10 exchanges that appear to have real volume of the 81
exchanges analyzed: Binance, Bitfinex, Kraken, Bitstamp, Coinbase, bitFlyer,
Gemini, itBit, Bittrex, and Poloniex. They estimate that the total ADV for the
market is $273M, less than the $6B reported by
[https://coinmarketcap.com](https://coinmarketcap.com).

~~~
gruez
>Page 61 has the 10 exchanges that appear to have real volume of the 81
exchanges analyzed: Binance, Bitfinex, Kraken, Bitstamp, Coinbase, bitFlyer,
Gemini, itBit, Bittrex, and Poloniex.

I didn't expect Bitfinex to be on that list, considering all the USDT
shenanigans that they were caught up in.

~~~
andrewla
I was a little surprised by that as well, but my own analyses of Bitfinex data
(together with the USDT/USD market on Kraken) brought me to a similar
conclusion that they are likely operating above board. That said, there have
been previous studies challenging that conclusion so I wouldn't be surprised
if they found more signals on a deeper inspection.

The slide deck does go into the USDT/USD differences as well, and even
mentions the large Bitfinex hack.

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travisjungroth
I spent last summer algo trading crypto. This study doesn't surprise me at
all. On one market, I consistently saw limit orders that would appear inside
the spread and then get instantly filled.

If you do the math on how much you need to spend on exchange fees to get a
coin to get coin to the top 100 in volume, it's only a few grand. That's
assuming you don't own the exchange.

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GauntletWizard
Company: "All our competitors are fraudulent. We're on the level, we promise"

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isoskeles
Seems like a good thing. Look at the volume for cryptocurrencies. It seems to
be insane / ridiculous, as if the sum total of all coins for almost any given
cryptocurrency are exchanging hands weekly (I know this is not exactly what
volume means, but it's close enough).

Looking at bitcoin volume on coinmarketcap right now, it's about $9B 24h
volume on a $71B market cap. In just 8 days the entire market cap of bitcoin
will have 'exchanged hands' (again, I know this is not exactly what volume
means). Meanwhile, most people are not using bitcoin as a medium of exchange.
These numbers just seem absurd to me. There's no way that people are using
bitcoin as a medium or exchange OR a speculative trade that frequently, unless
these traders are fickle idiots.

That said, I know little about how currencies work, so maybe I'm making some
invalid assumption. But I don't see how this data being faked is at all
meaningful _unless you 're using this data to try to estimate the "value" of
bitcoin, etc._ If so, yeah this is bad news for you. But how did you not know
that bitcoin, etc. aren't really being used to exchange value?

~~~
hbosch
You say:

"Looking at bitcoin volume on _coinmarketcap_ right now, it's about $9B 24h
volume on a $71B market cap. In just 8 days the entire market cap of bitcoin
will have 'exchanged hands' (again, I know this is not exactly what volume
means)."

And, from the deck in the article:

"Despite its widespread use, the _CoinMarketCap.com_ data is wrong. It
includes a large amount of fake and/or non-economic trading volume, thereby
giving a fundamentally mistaken impression of the true size and nature of the
bitcoin market."

(Emphasis mine)

~~~
isoskeles
What exactly is your point? That I am repeating the point in a paywalled
article? I have always thought the market data on cmc makes _no sense_ , and
am pointing out a simple experiment you personally can do to check.

~~~
hbosch
I just am saying that basing any assumptions on the data from CoinMarketCap is
to make those assumptions meaningless, because the data at CoinMarketCap is
false. Apologies if I'm misreading your comment.

