Bitcoin trades are fake
New research is casting even more doubt on the legitimacy of bitcoin trading. An analysis published by Bitwise this week shows that 95 percent of bitcoin spot trading is faked by unregulated. Do I personally believe there is fake trading in Bitcoin taking place off-exchange? Absolutely. Would I assume that 95% is fake? I would question that high of a number. I would have to review their criteria for classifying a trade as fake. I would probably place it at the 50%+ level but not 95%. Nearly all Bitcoin trades are fake, apparently. There have been suspicions for a while that the markets are overinflated. In fact, fears of market manipulation have held up regulatory approval for.
Bitcoin trades are fake
One way to manufacture volume is via a technique called wash trading, in which someone simultaneously buys and sells the same asset. Solid evidence for this comes from the small number of exchanges that can actually verify that their trading data is real, he said. Why would exchanges dishonestly inflate their volumes?
One incentive may be to attract ICO initial coin offering projects that want to be listed on exchanges that are facilitating lots of trading. To list such projects, some exchanges charge fees that can be as high as a few million dollars.
There are at least two important takeaways here. First, the real Bitcoin trading market is an order of magnitude smaller than is broadly reported. In other words, it's not real. Its median "spread," or difference between the price a seller wants and the price a buyer wants, for bitcoin was about 1 cent. That scenario passed Bitwise's test for having real volume. Exchanges may have an incentive to report fake volume. Bad actors may look to attract listings for new initial coin offerings, or ICOs, who want their cryptocurrency on an exchange where more trading goes on, Bitwise said.
The office of New York Attorney General also flagged the issue in a recent report warning that exchanges are vulnerable. Because most cryptocurrency trading platforms don't use the same monitoring tools as stock exchanges, SEC Chairman Jay Clayton has warned that investors may not get a fair assessment of bitcoin's price.
Hougan said this also explains why trading volume for regulated bitcoin futures has seemed weak. Skip Navigation. Markets Pre-Markets U.