A new study has discovered that roughly 87 percent of cryptocurrency exchanges could be falsifying their trading volumes. According to the study carried out by an analytics company called The Tie, 87 exchanges out of the top 100 were found to be involved in distorting the trading volumes recorded on their trading platforms.
Trading volumes look suspicious
The research company revealed the contents of its findings in a series of tweets earlier this week, stating that they found 87 percent of the exchanges have very suspicious trading volumes. In addition to that, 75 percent of the exchanges that were investigated had some suspicious activity going on, the company added.
“If each exchange averaged the volume per visit of Coinbase Pro, Gemini, Poloniex, Binance, and Kraken, we would expect the real trading volume among the largest 100 exchanges to equal $2.1 billion per day. Currently, that number is being reported as $15.9 billion,” the report pointed out.
The cryptocurrency market continues to struggle with the manipulation of trading volume data by crypto exchanges. Several artificial factors could lead to an increase in volume, making it look like there’s demand for a specific digital currency when, in fact, the interest is minimal or, in some cases, virtually non-existent.
Crypto traders and investors are usually attracted to exchanges that have high trading volumes as they believe those platforms have high liquidity. However, doubts surrounding the crypto market could be one of the reasons preventing some professionals from venturing into this sector and the development of better and more comprehensive regulations for crypto trade and investment.
To analyze the trends of the crypto exchanges, The Tie investigated the average trading volume per user visit on leading platforms including Coinbase Pro, Binance, Gemini, Poloniex, and Kraken, which gave them a figure of $591. This metric was used on less popular exchanges, with the company explaining that the platforms were chosen due to their extensive usage by institutional investors, reputation in the market, and their reported trading volumes.
The report found that roughly 60 percent of the exchanges reported trading volumes that were ten times higher than the expected values, with the traffic to their websites not correlating with the amounts recorded. The Tie added that ZBG, Bitmax, MW, Lbank, and Coinbene recorded the highest number of falsified volumes. However, Binance, Coinbase Pro, Poloniex, and Kraken had transaction volumes that were in accordance with their reported trading volume.
Even though website traffic metrics do not account for API and mobile app trading data, they, however, provide a strong basis for comparison across multiple platforms and can be used to identify suspiciously reported trading volumes, The Tie noted.
The company stated that its researchers were curious about finding out if the reported volumes on most crypto exchanges were accurate. Over the past month, the team looked into the top 100 platforms by trading volume and was able to come up with its results.
The Tie added that “We used Similar Web website viewership metrics to calculate the estimated 30 days traffic to each exchange’s website. After doing this, we divided the reported volume for each exchange by the number of monthly website visits to determine the reported volume per visit.”
Manipulation in the market causing severe harm
The manipulation of trading volume by exchanges is a serious problem for the cryptocurrency space. The United States Securities and Exchange Commission (SEC) had previously pointed out that the high manipulation of trading data is one of the reasons why it hasn’t approved a Bitcoin ETF yet. The commission chairman, Jay Clayton urged the crypto community to develop some in-house regulations to curb such vices before if they want an ETF to be approved anytime soon.