Bitwise Claims 95% of BTC Trading Volume Fake

According an analysis done in a report by the crypto index fund Bitwise Asset Management, 95% of the trading volume of BTC (Bitcoin) on unregulated cryptocurrency exchanges seems to be either fake or non-economic.

Research Analysis Method

Bitwise head of research, Matt Hougan stated that the company had developed infrastructure that had been programmed to read data from the 81 top reported cryptocurrency exchanges.

Then the order book data from these exchanges was scrutinized 4 times every second over a period of days for recent trades. Then a series of statistical tests were run to pinpoint fake trading behavior.

Bitcoin Futures Market Significant

Bitwise presented this report to the US SEC (Securities and Exchange Commission) earlier this week as a part of the proposed rule change in relation to its application for launching a Bitcoin ETF (exchange traded fund). The company had filed its application for this ETF in January this year.

Its report claimed that while 95% of the trading volume reported for Bitcoin was faked, the BTC futures market was significant when assessed against the 5% spot trading that took place in regulated markets.

According to CoinMarketCap.com, one of the leading sources of information on cryptocurrency trading, reports that average daily trading volumes in BTC are at about $6 billion. However Bitwise argues that if the site’s own method of calculation is used, then the actual trading volume for Bitcoin is just about $273 billion.

This huge gap in the reported figures and the possible actual figures mean that the trading volumes in Bitcoin futures reported by CME Group as well as Cboe actually has a much bigger impact on the Bitcoin market than was previously thought.

The average daily trading volume of Bitcoin futures on CME and Cboe together comes to about $85 million. The average Bitcoin spot trading volume on Binance is about $110 million, which according to Bitwise, is the exchange that performs that largest number of regulated, legitimate trades.

True Spot Markets for Bitcoin

According to Bitwise’s report, there are only 10 cryptocurrency exchanges that hold the true spot trading market for Bitcoin, and together they do about $300 million in trading volumes per day.

Included in that list are Binance, Bitfinex, Coinbase and Gemini. Bitwise states that it is only these (10) exchanges that trade uniformly with each other, meaning that the average price spread between these platforms is less than 1%.

Other unregulated exchanges show a much wider spread in Bitcoin prices, which Bitwise believes is an indication that they are showing fake trading volumes.

Added to this, Bitwise’s analysis shows that the United States accounts for a much larger percentage of the genuine Bitcoin spot market.