Major cryptocurrency exchanges are manipulating their own volume figures. That’s according to a new report by the Blockchain Transparency Institute (BTI).
The BTI report claims as much as 80% of the volume on the top 25 bitcoin pairs are subject to wash trading and manipulative bot trading.
Exchanges are inflating their own volume numbers in an attempt to draw huge listing fees from new coin projects.
What is wash trading?
Wash trading is a practice by which an investor or company buys and sells an asset simultaneously. They are essentially buying and selling from themselves. Do this with enough frequency, and it gives the impression of huge volume.
The BTI claims that major exchanges use wash trading techniques to fake the volume on their exchanges.
By doing this, crypto exchanges appear larger and more active than they truly are.
In some cases, true volume is under 1% of reported volume
To find out how deep the problem goes, BTI calculated the true volume of CoinMarketCap’s top 25 BTC pairs. The research firm discovered that actual volume on most of the pairs is less than 1% of the reported figures.
The worst offenders: OKEx, Bithumb, Huobi
Among the worst offenders are some of the biggest crypto exchanges on the planet.
OKEx, the fourth-largest exchange by reported volume, was singled out for evidence of wash trading on all 30 of its traded tokens. Huobi, the fifth-largest by reported volume, appears to be wash trading most of its top pairs, according to the report. And Bithumb, the second-largest by reported volume, is accused of wash trading its Monero, Dash, Bitcoin Gold, and ZCash pairs.
Bithumb now tops the BTI’s Exchange Advisory List, which highlights risky or opaque exchange practices.
Binance, Bitfinex, Coinbase Pro get the green light
Not all exchanges are engaging in nefarious wash trading. The BTI found no evidence of manipulation at Binance or Bitfinex. Binance is currently the largest exchange by adjusted volume on CoinMarketCap.
Bitfinex has been accused of market manipulation in the past due to its close ties with stablecoin Tether. However, the BTI report confirms that 100% of trading volume is real.
Coinbase Pro, Kraken, and Gemini also appear to have 100% true volume.
Why are crypto exchanges manipulating their volume?
By faking their volume, crypto exchanges appear bigger and more liquid than they truly are. A high “reported volume” also puts them near the top of CoinMarketCap rankings, which drives more traffic to the exchange.
With a bigger profile, the exchange can charge huge fees for projects looking to list their coins on the platform.
The BTI estimates that coin project teams spend an average of $50,000 on listing fees just for the exchanges on its advisory list. It amounts to $100 million stolen by shady exchanges.