crypto exchange manipulation

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.

BTI Advisory List: use with caution

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.

Crypto exchanges reporting true volume, according to BTI

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.

Crypto Curious? Subscribe to the Block Explorer newsletter to get exclusive crypto insights before they appear on the site.

Cryptocurrency

FOR IMMEDIATE RELEASE: 12th July 2018

Cryptocurrencies are traditionally perceived as investment avenues for quick and high returns, and mostly been limited to trading purposes. However, as they continue to gain considerable ground in Asia-Pacific (APAC), several companies are now looking to leverage the high user base and explore the other possible use-cases, says leading data and analytics company GlobalData.

Reportedly, Japan and South Korea are among the top three markets globally, along with the US, for cryptocurrency trades. As of January 2018, nearly one third of global bitcoin transactions were made with Japanese Yen and South Korea accounted for around 35% of global Ethereum trading.

Sowmya Kulkarni, Payments Analyst at GlobalData, says: “The gradual rise in cryptocurrency acceptance at merchant locations can be seen as an upcoming trend in the region, with merchants increasingly opting for this method of payment due to benefits such as lower transaction fees, no chargebacks, and cheaper payment acceptance from foreign tourists.”

Large merchants such as Bic Camera and Yamada Denki in Japan and Goto Mall in South Korea are now accepting payments with cryptocurrencies, which is likely to push many more peers to look at accepting cryptocurrency payments.

Most recently in March 2018, Bithumb – a cryptocurrency exchange in South Korea – partnered with Korea Pay Services to enable 6,000 retail outlets across South Korea to accept cryptocurrency payments. Earlier in April 2017, Coincheck – a cryptocurrency exchange in Japan – partnered with Recruit Lifestyle to roll out its bitcoin-enabled POS app AirREGI across 260,000 merchant stores in Japan.

The continued development of the cryptocurrency market has attracted considerable interest from regulators in Japan, Australia and South Korea. The new regulatory initiatives are expected to provide a much-needed push to widen the use-case of cryptocurrencies.

“Cryptocurrency has traditionally been a topic of discussion for its volatility and authenticity, with several industry experts not reckoning it as an alternative to traditional payment tools. This perception is changing with a large number of merchants and consumers in the region now gradually embracing it as a payment tool. Lower transaction charges compared to traditional card-based payments could make cryptocurrencies a preferred choice among merchants.

“In addition, merchants can also avoid costly chargebacks as purchases through cryptocurrencies are one-way and irreversible in nature. Customers also stand to benefit from cryptocurrency transactions in the form of potential pricing benefits from merchants, higher security, and easy borderless payments. This form of payments is now becoming increasingly popular among tourists, as they don’t attract foreign exchange charges,” concludes Sowmya.

ENDS

For more information:

Analysts available for comment. Please contact the GlobalData Press Office:

Asia-Pacific: +91 40 6616 6809

EMEA & Americas: +44 (0)207 832 4399

Email: [email protected]

About GlobalData

4,000 of the world’s largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make more timely and better business decisions thanks to GlobalData’s unique data, expert analysis and innovative solutions, all in one platform. GlobalData’s mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, financial, technology and professional services sectors.

If you would rather not receive future communications from GlobalData, let us know by clicking here.
GlobalData, John Carpenter House 7 Carmelite Street, London, N/A EC4Y 0BS United Kingdom

bithumb

On June 7, 2018, South Korean Cryptocurrency Exchange Bithumb released the results of a user survey called, “Cryptographic Investment Trends.” It captured the perspective of 2,507 virtual currency investors over the age of 20. The survey included questions on investment plans and government regulations. A notable finding was that 42.8 percent of those surveyed plan to “hodl” or keep their crypto-investments over the long term. A Bithumb press release authored by “Bitsumm manager” states:

As cipher money continues to be recognized as an asset in major industrialized countries, the perception of cipher money investment is gradually matured by domestic investors.

Bithumb Survey Findings

The Bithumb survey discovered that the older the cryptocurrency buyer, the more likely they are to plan to hodl and make longstanding investments. Here are the percentages of each age range that plan to preserve their holdings:

  • Investors in their 20s: 30.8 percent
  • 30s: 40.3 percent
  • 40s: 45.3 percent
  • 50s and older: 49.1 percent

Bithumb also shares that 39.5 percent of those surveyed plan to keep their investments, even if the government requires them to pay capital gains taxes, or taxes levied on profits from the sale of assets, on cryptocurrency. This is an 11 percent increase over Bithumb survey data from a year ago. About 13.1 percent responded that they would completely stop investing in digital money if this tax is imposed. The exchange concludes, “more and more investors are looking at cryptographic money as assets and looking for stable investments.”

Bithumb was founded in 2015 and is one of one of the largest exchanges in South Korea. The survey was conducted between April 30 and May 6, 2018, through Bithumb Cafe, Bithumb’s official communication channel.

Other South Korean- and Bithumb-related News

South Korea continues its tumultuous journey to establish crypto-trading regulations, which included discussion of a total ban in January 2018.

Bithumb recently made regulatory headlines when it announced it would ban users from 11 countries in late May 2018 as part of its anti-money laundering or AML policies. Specifically, citizens of countries labelled as Non-Cooperative Countries and Territories, or NCCT, were banned as of May 28. NCCT countries are noncompliant with the standards set out by the Financial Action Task Force on Money Laundering, or FATF, an intergovernmental organization established by the G-7 in 1989. This group of countries includes North Korea, Iran, Iraq and Sri Lanka.

Bithumb stated in a related press release:

We will strictly enforce our own rules and protect our investors, and we will actively cooperate with the authorities. We will lead the standards of the Worldwide Codex Exchange with autonomous regulation ahead of schedule.

Earlier in 2018, South Korean exchanges including Bithumb banned anonymous cryptocurrency trading.

As of May 2018, Yoon Suk-heun, the new governor of the country’s Financial Supervisory Service, is reportedly considering relaxing cryptocurrency regulations.

The featured image is a collage featuring the Bithumb logo (credit: Bithumb) and a public domain survey image.

Bithumb is a South Korean cryptocurrency exchange founded in 2015 (according to WHOIS data on its domain). Shortly after which it had an explosion of growth that made it one of South Korea’s largest bitcoin exchanges, and puts it firmly at #11 on BlockExplorer’s top 25 list of cryptocurrency exchanges.

It supports a healthy number of trading pairs, though they are somewhat quiet. Bithumb supplies an API for programmatic trading and is a decent prospect for any tier of trader that is specifically looking to trade in Won.

Bithumb

bithumb cryptoURL: bithumb.com
Total trading pairs: 11
Deposit fees: Only for extremely small deposits
Withdrawal fee: Yes, flat fee
Trading fees: Yes, flat 0.15%
Verification: Yes, four levels

Registration

Bithumb’s registration process is a bit more in-depth than other exchanges, as it requires more information. Specifically, it requires your full name, date of birth, phone number, and nationality. The phone number you enter will be confirmed by way of an SMS based code system.

Interface

Bithumb’s interface is white with orange highlights and black text, making it rather bright, which could cause eye strain if viewed in the dark. The interface has the basics available such as a place to submit buy and sell orders, an order book for the entire trading pair, and a history of your orders. Notably, the interface lacks an immediately available chart for your selected trading pair. Though a chart can be accessed by clicking a button above the order book on the right. On the left, you can select other trading pairs.

Fees

Bithumb offers free deposits for all deposits that are not tiny, what constitutes tiny is different per currency, for bitcoin, the number at the time of writing was 0.005 BTC. For withdrawals, you will pay a flat fee that is currency dependant.

Trading has a 0.15% flat fee, but you can purchase a coupon to reduce your trading fees to a set number (including 0%) for a given amount of trading.

Verification

Bithumb has four levels of verification, all of which increase your maximum withdrawal, and require some personal information from you.

Verification Level Requirements
Level 1 Granted automatically upon registration
Level 2 Copy of a government ID
Level 3 A signed “pledge” and a copy of a government ID
Level 4 Proof of address no older than three months

Please note that government IDs showing all numbers will be rejected, bithumb states all IDs must have 7 numbers covered.

Security

Bithumb scores mixed results on the security front. They offer 2FA to secure accounts via Google Authenticator, and all withdrawals are protected by a PIN that is entered during registration. Otherwise, the more questionable practice is that there is a rather short maximum length of 12 on passwords.

south korea bans cryptocurrency trading

The Justice Ministry of South Korea has announced plans to ban cryptocurrency trading. While this is not a ban on the use and holding of cryptocurrency, the effect on exchanges is already being felt. Multiple Korean cryptocurrency exchanges have been raided by local tax authorities and police. The alleged crime? Tax evasion. The finance ministry had increasingly been looking into local cryptocurrency exchanges, especially as their activity grew to eclipse that of Korean stock exchanges such as Kosdaq. Korean official Park Sang-ki said at a press conference:

“There are great concerns regarding virtual currencies and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges.”

Korean cryptocurrency exchanges raided by authorities

The two largest Bitcoin exchanges in Korea, Coinone and Bithumb, were raided during this past week. According to a Coinone employee that spoke to Reuters under conditions of anonymity, the exchange is cooperating with authorities on the tax matter. He said:

“Local police also have been investigating our company since last year, they think what we do is gambling.”

In addition to exchanges, the finance ministry is also looking into the banks that are providing virtual currency account services to exchanges, and possibly other companies. According to reports, six local bank are under the eye of financial authorities for offering such services.

Cryptocurrency Market Cap retreats on false news of Korean cryptocurrency trading ban

Since the release of this news, cryptocurrency markets across the world have reacted to the news negatively. Korean exchanges were a major driver of volume prior to these events, and were largely perceived to have captured the activity of other Asian cryptocurrency traders, such as those in China. Which cryptocurrency exchange becomes the top of the pack now, remains to be seen. One thing seems certain though, the days of the top volume exchanges being based in South Korea and driving the all time highs are long gone.