Fake crypto stats are a menace to the trading world since the diluted signals due to fake cryptocurrency market volume statistics are deemed a manipulative technique.
In the first quarter of 2019, publications by Bitwise suggested that 95% of all trading volume is fake. Fast forward to today, and the issue, although reduced, still remains.
Fake crypto stats volume issue not solved
Bitwise 10 Exchanges were used by Chainalysis, which consisted of Bitstamp, Poloniex, Coinbase, and other similar exchanges. This served as a standard for exchanges that are reporting their trading volume. Finally, the ratio was calculated between Bitcoin received vs. Bitcoin traded.
The fake crypto stats in volume numbers were evident from this comparison. The results revealed a ratio of 1:6, which shows a discrepancy of the effect that for every BTC deposited on an exchange, there are six that are trading on the platform.
After this, analysts investigated the top 25 exchanges that are outside of the Bitwise 10, possessing the largest on-chain volumes. Twelve of these had greater ratios than the Bitwise 10 in 2018, but have fallen since then.
Where do the fake crypto stats originate?
Exchanges are guaranteed higher exposure for greater trading volumes on market data platforms, which inevitably will attract more traders and will also generate more profit.
This is done because getting new customers has been difficult since the 2017 bubble, which resulted in altcoins leaving a negative impression on investors.
Smaller user bases mean that business is still on the down-low for medium-sized exchanges. Other top tier exchanges attract the majority of virtual currency users because of their superior products. Hence when no other solution is in sight, these poor performing exchanges tend to go for false volumes.
It is vital that dishonest and unfair members of the cryptocurrency ecosystem be called out like this for it to grow as a widely accepted asset class.
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