San Francisco Assets Management Foundation: 95% of Trades Volume Is Fake

Last Modified:12 May 2020 14:34:49
San Francisco Assets Management Foundation: 95% of Trades Volume Is Fake

After publishing the news and reports implying the exchanges being hacked, this time the event is witnessing the fakeness of trades’ volume of cryptocurrencies. San Francisco Asset Management Foundation announced in a report that 95% of the total Bitcoin trades volume is completely fake in unregulated exchanges. How do these exchanges manipulate the trades’ volume? Considering the capability of Blockchain and cryptocurrencies, every kind of manipulation and fraud in cryptocurrencies is impossible. Therefore, how are these frauds? Why is there not any supervision and control imposed on these exchanges?

Unreal Volume of Cryptocurrency Trades Using Bots

Coinmarketcap is one of most common resources in the field of trading Bitcoin and data, and every day its trades’ volume is reported about $6 billion Bitcoin; although, it seems that just $723 million, i.e., 4.5% of the reported trades’ volume is real, and the others are fake.

In addition, a report from Blockchain Transparency Institute (BTI) has claimed that many exchanges use bots to fake trades’ volume. The research by this institute showed that money laundering influences 80% of 25 pairs of Bitcoin. Moreover, the claim of the intentionality of these measures has raised many worries for the industry. In spite of the fact that coinmarketcap is the well-known source of information exchange of Bitcoin, but as it was reported, a bulky volume of its trades is fake and uneconomic. This fact causes investors, regulators and other stockholder groups have a false image from the real and natural volume of the Bitcoin market.

The findings show that how do unregulated and unsupervised exchanges like CoinBene increase the trades’ volume in proportionate with regulated exchanges like Coinbase. However, if you take a look at the trades volume reported in CoinBene Order Book which are on rising trend; it is specified how are trades proposed in its suggestions and how are parameters used to increase the volume. It is worth mentioning that cryptopotato has published a report in December about money laundering. These two studies have overlap in their findings about CoinBene and raise the same subject, as the December report showed that just 1 percent of the exchange trades is real.

Why Do Exchanges Commit Money Laundering?

There is a strong competition among exchanges, so the pressure coming from this competition causes them to get engaged in margin activities and out of the boundaries of traditional financial regulations. These activities rely on a high volume which means more charges and liquidity. Finally, the traders are absorbed by the high volume of the exchanges’ trades which is followed by facilitating the increase of trades and creating growth cycle.

One of the interesting aspects of this issue is that how is the extensive volume of trades high in some of Bitcoin unregulated exchanges. For example, while studying the report, CoinBene Bitcoin price and the distance between the demand and supply price show high prices. In the time the distance between supply and demand reached $34.74 in CoinBene, it was just $0.01 in Coinbase Pro.

The main problem might be the fact that CoinBene has alleged that its trades’ volume is 18 times more than its trades’ volume in Coinbase Pro. The result of this CoinBene allegation should be decreasing the distance between its supply and demand since heavy and frequent trades naturally decrease this distance; however, CoiBene distance is actually 3400 times more than Coinbase Pro.

If the trades’ volume Coinmarketcap has reported is true, it shows that only 8.6% of all Bitcoins are transferred daily.

All in All, Bitcoin Trades Volume Is Highly Organized

Through decreasing fake volume of unregulated exchanges, if just the real volume of 10 supervised exchanges taking most of the trades is considered, the result will be the high organization of the perspective of Bitcoin trades in the U.S. and following economic regulations.

The purpose of Bitwise from this study was proving this fact that the Bitcoin market is more organized and efficient than what the public imagine. Bitwise hopes to have been able to convince regulators, especially U.S. Securities and Exchange Commission that Bitcoin is like the other goods. If Bitwise attempt to convince the U.S. Securities and Exchange Commission is fruitful, it will be very eligible to be confirmed by ETF. Regardless of trading concepts in this study, Bitwise has shown that the investors are still able to consider Bitcoin a good which is capable of replacing their other non-cash assets like gold and silver.