Crypto Exchange Fake Volume

Fake Volume on Cryptocurrency Exchange Sites

A report was published recently by Bitwise Asset Management which has revealed some shocking findings and has taken the market by storm. The report claimed that 95% of the total volume circulating in the crypto-markets is fake.

The Security and Exchange Commission of the USA was presented with the findings, but it is hard to justify that Bitcoin has matured as a technology and holds a sophisticated market. Despite the fake volumes making rounds in the crypto-markets, the findings make a compelling case about the maturity of Bitcoin technology. However, the report that has been presented to the SEC has some loopholes that have not been addressed (Wilner, 2019).

Problematic Exchanges Other than the Reported 95%

While the issue that cryptocurrency exchanges are reporting false volume figures, as pointed out in the report, cannot be disputed, it is very hard to believe that CoinMarketCap is not involved in the fabrication of figures, as the report suggests. The report also mentioned Binance and Bitfinex as two of the 10 exchanges that report true figures, but at the same time this report completely leaves out some information from these two exchanges, on purpose, to support the claim for ‘real’ figures.

The report holds the narrative that Bitfinex and Binance account for over 50% of the total Bitcoin Volume. This is hard to digest as neither of the two offers normal banking transactions like other crypto-exchanges that have been mentioned in the report. To top it off, both of these exchanges also have regulatory issues, which makes it a matter of serious concern that they would be considered trustworthy figures providers.

Binance was initially funded by an ICO and was supported by a crypto-token which could not meet the standard banking requirements. Likewise, Bitfinex has had a history with financial institutes, even suing Wells Fargo at one point back in time. Also, both of them have been using and issuing Tether tokens.

The Tether Scandal

Tether is notorious for ‘stable-coin’ built on the Omni protocol (formerly known as Master coin). The block-chain claims to use a methodology known as ‘Proof of Reserves’ which essentially enables it to have its value pegged to the US dollar. Every ‘stable-coin’ has to provide its complete audit report to ensure that its reserves have been verified by some external institute and are following the tokens circulating in the market. The problem with Tether is that there is no proof that their crypto-token is backed by a US dollar stored in reserves, as the company claims.

Tether even terminated an audit company in the middle of an auditing process, citing ‘complexity’ in the procedure. To further compound issues, Tether has had an issue with banking institutes in the past, just like Bitfinex. Some analysts even go as claiming that Tether is not even a stable coin at all. Its usage by exchanges like Bitfinex and Binance is seen as an attempt to avoid actual banking and regulatory compliant procedures, which gives rise to even more speculations.

Blockchain Transparency Institute

The report also contains a reference to a crypto-community group known as the Blockchain Transparency Institute. The report cites the group and its research in identifying up to 56 exchanges with fake volumes, providing the reason for such an investigative body as “a common institutional understanding of the true nature of the real market.”

Surprisingly, the Institute also seems to be plagued with transparency issues. There is not much information about the team and administrative powers behind the institute, nor is there any concrete knowledge of their research methodology available to any of the users. An interesting relation that came up after a little investigation was that the author of the SEC report i.e. Bitwise Investments is listed as a first-class investor on Blockchain Transparency Institute’s website. This pre-existing relationship was not made public by Bitwise, which raises more concern as to how truly transparent they are.

Questions to Ask

While it is important to at least give Bitwise credit for putting forward these findings, some key questions must still be asked by the regulatory authorities. The first and most important question being why Binance has been referred to as an exchange that accounts for the ‘real’ market? Almost all other exchanges mentioned in the report are registered Money Service Business with FinCEN, except for Binance, while it makes up about 40% of the total crypto-volume trade. If it’s not registered with FinCEN, how can we be sure of its ‘realness’?

Secondly, with regard to the report, Bitfinex and Binance make up around 55% of the total ‘real’ volume. The question that naturally comes to mind is why these two largest exchanges escaped scrutiny to reveal the shady matters like their involvement and relationship with Tether, which is considered a dishonest scheme in the crypto-markets.

Lastly, why should one believe the figures provided by the Blockchain Transparency Institute, when we cannot even make out who is behind this institute? Why has the administrative team behind the institute kept their identities a secret from the crypto-community?

With all of this said, Bitwise undoubtedly deserves credit and recognition for putting forward these findings. It is due to their time and efforts that unregulated matters have come to limelight. However, Bitcoin cannot be considered a mature product if two of its largest trading exchanges have questionable relations with the banking institutes and lack compliance with standard procedures. Yet, with these findings been made public, the regulators will realize what work they have to do now. Surely, the suspicion and the criticism if put into proper consideration will play a positive role in the betterment of the crypto-community.


Wilner, Y. (2019, June). Forbes. Retrieved from Forbes: