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Report Claims Over 80 Percent of Top 25 BTC Trading Pair Volumes on CMC Are Wash Traded

A new report claims the majority of the top 25 BTC trading pairs listed on CoinMarketCap (CMC) are based upon “grossly” inflated false volumes.

A new report from data researchers at the Blockchain Transparency Institute (BTI) claims that the majority of the top 25 Bitcoin (BTC) trading pairs listed on CoinMarketCap (CMC) are based upon “grossly” inflated false volumes. The researchers’ findings for December were published in BTI’s “Exchange Volumes Report” on Dec. 13.

BTI presents its report as “a deeper dive into specific trading pairs on exchanges which are showing clear evidence of wash trading.” The data has reportedly been compiled by using algorithms to analyze volume data points and order books, as well as by consulting with “market makers, high frequency traders, and trade surveillance consultants” over a period of three months.

The Institute states it has thereby “calculated the true volume of the CMC top 25 BTC trading pairs,” finding that:

“Most of these pairs’ actual volume is under 1% of their reported volume on CMC. We noted only 2 out of the top 25 pairs not to be grossly wash trading their volume, Binance and Bitfinex.”

Wash trading” is the term for a process whereby a trader (or bot) buys and sells an asset for the express purpose of artificially inflating volumes to falsely signal interest in that asset, thereby feeding misleading information to the market. The report concludes that, based on its findings, “over 80% of the CMC top 25 BTC pairs volume is wash traded.”

BTI’s volume analysis for the top 25 BTC trading pairs on CoinMarketCap. Source: BTI

Liquid also shows a 100 percent match of its reported volume to its actual volume over a 24 hour period.

Among those high-profile crypto exchanges reportedly engaging in wash trading is allegedly OKex. According to BTI, algorithms detected manipulation for “just about all” its top 30 traded tokens. Based on this evidence, BTI states it has added the exchange to its “Exchange Advisory List,” which it has compiled in order to caution token creators against paying listing fees to certain exchanges.

“Clear evidence” of wash trading was also found for Huobi and HitBTC, “but to a lesser degree” than OKEx, according to the report. BTI further states it analyzed Bithumb and found “a large amount” of wash trading primarily with altcoins Monero (XMR), Dash, Bitcoin Gold and ZCash (ZEC); the “top wash traded tokens” on Bithumb, according to the report, vary for each given month.

According to BTI, many crypto exchanges with seemingly high reported volume in truth “exist solely to collect [listing] fees while their bots run their exchanges.” The report estimates that the average crypto token project spent “over $50,000 this year” on listing fees from exchanges on its cautionary Advisory List, with around $100 million spent in 2018. “Over 50 exchanges […] wash trading over 95% of their volumes,” the report continues, some of them making “over” $1 million this year solely via fees.

As reported, the United States Commodity Futures Trading Commission (CFTC) has this year demanded extensive trading data from several crypto exchanges as part of a probe into possible manipulation in the crypto spot markets and its potential impact on BTC futures.

Also this year, the U.S. Department of Justice (DOJ) opened a separate investigation into BTC and Ethereum (ETH) price manipulation, looking into how traders may be manipulating prices through illegal spoofing and wash trading.

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CoinMarketCap Commits To Transparency After Data Manipulation Worries

When you open up your browser what is the first thing you type?

For many enthralled with cryptocurrencies, it is often CoinMarketCap.com (CMC), a premier crypto statistics and price tracking site. The site quickly blew up last year in direct correlation with Bitcoin’s historical run-up, bringing thousands, perhaps even millions of new consumers into the industry.

According to CMC’s five-year anniversary post, the site has garnered over 60 million visits in the first half of 2018 alone, attesting to the fact that it has become an integral part of the cryptocurrency industry.

Despite holding a place that is near and dear to the hearts of many cryptocurrency enthusiasts, CMC has still been subject to harsh criticism from some skeptical players in this industry. This criticism has mainly taken the form of accusations of posting exchange data from platforms that promote wash trading or manipulation.

However, in a July 19th announcement, the CMC team stated that they “stand for data transparency and clarity,” and introduced a variety of new features to help combat falsified/fraudulent points of information alongside their statement.

Statistics Website Brings Falsified Exchange Data Issue To Light

The statistics service first opened up their announcement by stating:

In recent weeks, we have heard increasing concern around exchange volumes and rankings. There are three main concerns that have been brought to our attention, that have been skewing the perception of the data on the site

CMC went on to explain the three primary issues with exchange data today.

Firstly, the issue with fee-free or transaction mining exchanges. For those who are unaware, these exchanges use a fee structure model that rebates users with an exchange’s in-house crypto when transactions or trades are made. Although this may sound innocent enough, this can often encourage consumers to trade cryptocurrencies back and forth with themselves, creating volume artificially.

Secondly, CMC pointed out that low fee exchanges promote their extremely minimal fees to help spark trading activity. While this normally isn’t a problem, for users of CMC this isn’t made apparent when looking at exchanges on the statistics website.

Last but not least, artificial volumes or wash trading, which is by far the most dubious and complex problem with exchanges today. Due to the fact that CMC and other statistics websites list exchanges by volume, long story short, many questionable exchanges may enlist the help of bots or API manipulators to create artificial volume.

CMC’s Proposed Solutions To The Issues

However, CMC has proposed a plan to amend these issues. The site wrote:

Going a step further, we will be progressively updating our exchange rankings to be even more in line with our view that users should be given the power to experience and use the data in a way that fits their needs most.

CMC will now introduce new ways for site users to filter through data given by CMC, namely allowing filtering by volume data and by the fee structure of an exchange. Additionally, the site will introduce new categories of exchange data, such as the 7-day and 30-day volumes, to show if an exchange has consistent volumes.

It is clear that CMC is ready to make a step in the right direction, ensuring that they only have the best intentions when providing data for the cryptocurrency consumers.

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