Research made by head of data and analytics at Forbes’ crypto asset division, Javier Pax, shows that there is a big mismatch between actual Bitcoin trading data and the one crypto exchanges report.
Due to the lack of regulation and any standards of reporting, there have been big concerns about how accurate is the data provided by crypto exchanges. Now, Forbes says that most of it is “fake”.
Deliberately increased trading data reported
Pax made a research of 157 crypto trading venues, the article does not name any of them, though. His analysis showed that more than 50 percent of all trades with Bitcoin are falsified or are wash trading.
The analyst refers to the figures of BTC trading volume. On June 14 it constituted $128 billion by his estimates. However, other multiple sources of self-reported volume was roughly twice as big - $262 billion.
Two reasons are possible here, the author of the article says. The first one if that unregulated exchanges deliberately pump the figures of their trading volume when reporting. This is an easy way for them to get more attention and customers. In 2019, in was revealed that 95 percent of data demonstrated by the largest website with data on exchanges – CoinMarketCap – was incorrect.
According to the research, smaller and the least famous exchanges in the crypto market take to this method of promoting themselves. Their volumes are 80-99 percent smaller than they prefer to report.
Wash trading by whales
The second explanation is called “wash trading”. This is when whales open and then right away close positions. Large traders use this illegal technique to make it look like there is a high demand in the markets in order to manipulate the latter. Wash trading is efficient when it comes to pump-and-dump strategies.
While, the research made by Forbes is related only to Bitcoin, it is not hard to imagine what is happening with small-cap cryptocurrencies when exchanges report trading volumes on those.