Cryptocurrency exchanges have been under the microscope for several months, with the upswing in Bitcoin’s [BTC] price contributing to certain platforms fudging their numbers. Several reports and research pieces have surfaced, classifying exchanges between those having “real” and “fake” volumes.
The most prominent report was issued by Bitwise Asset Management, which strictly stated that only 10 exchanges had “real” volume, while the other 95 percent were fake. However, in a recent report, the Bitcoin ETF hopefuls have highlighted three exchanges that have “fake volume with possible real-world footprints”.
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.”
On the topic of OKEx’s trade volume, the report quite clearly spelled,
“While there may be a smattering of real bitcoin volume on OKEx, the charts are clear: the vast majority of bitcoin volume here is entirely fake.”
HitBTC, which is rumored to be in liquidation woes, was also labeled as having “entirely fake” volume. The trade size histogram showed an “eerily flat line,” posting no volume after 0.5 BTC. The exchange’s hourly volume shows complete disparity with the reference exchanges, with most volume activity concentrated between April 29-30.
Bitwise added that market events which affected the volume of the “real” exchanges did not impact HitBTC and hence, the report read,
“We believe HitBTC’s volume is predominantly wash trading, done in small trade sizes.”
Huobi’s trading and volume pattern according to the study, was the “trickiest,” Bitwise stated. Prior to their March study being released, the Trade Size Histogram showed a “highly anomalous pattern.” The chart shows an increase in trade volume between 5-11 BTC, where “very little trade volume occurs.”
Prior to the release of the Bitwise report, from 3 March to 21 March, the exchange’s Trade Size Histogram showed a “consistent pattern,” which “completely disappeared within three weeks.” The report contends that those, at Huobi, engaged in “wash trading,” cleaned up their act to temporarily portray a change in trades to avoid “detection.”
The report cautioned,
“We also recognize that Huobi might have taken action to clean up wash trading on their platform within that time frame, but that view is challenged by the fact that Huobi’s reported bitcoin trade volume did not meaningfully drop during that time.”
Several reports have also supported Bitwise’s claims that the three exchanges fake their volume, although not completely. The report cited studies from the Blockchain Transparency Institute, The Tie and Sylvain Ribes. Compiling a simple weighted average of the estimates by the aforementioned reports, Bitwise concluded that the “estimated real volume” of HitBTC, Huobi and OKEx were,
To put these numbers in perspective, according to CoinMarketCap, HitBTC, Huobi Global and OKEx had $1.63 billion, $1.97 billion and $2.57 billion, respectively, in reported trade volume over the past 24 hours.
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