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Now You Can Find Out What Crypto Exchanges Report Real Volumes (or Maybe You Still Can’t)  

Mon, 05/13/2019 - 16:16
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Alex Dovbnya
CoinGecko exposes ‘Bitcoin…who?’ exchanges that post inflated numbers with the help of its new ‘Trust Score’ feature
Now You Can Find Out What Crypto Exchanges Report Real Volumes (or Maybe You Still Can’t)  
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Cryptocurrency ranking platform CoinGecko has unveiled a new feature that will help fight artificially inflated trading volumes, according to Coindesk. Based on the legitimacy of the reported numbers, crypto exchanges will be given a trust score. However, the accuracy of this score can be put into question.   

Forbes: 95% of Exchange Volume Can Be Wash Trading, Pushing Bitcoin Price Up

Showing true colors

CoinGecko strives to make wash trading less appealing by introducing the above-mentioned ‘Trust Score’ feature. In order to measure the trustworthiness of each separate exchange, CoinGecko came up with the ‘benchmark’ volume of ten honest exchanges. Each exchange, depending on how transparent it is, will show its true color (green, yellow, or red).

They take into account such technicalities as the bid-ask spread and the level of liquidity on a certain exchange. Crypto Integrity recently concluded that OKEx uses the most sophisticated wash trading mechanisms to hide their real numbers.  

A flawed metric?

CoinGecko also uses SimilarWeb to analyze the website traffic in relation to trading volumes, but the fact that there is no clear correlation between these two metrics is a worrisome sign that some of its data could be inaccurate.  

“If an exchange is reporting high total trading volume and therefore ranking as one of the top exchanges by reported trading volume, we would expect that there would be high number of website visitors as well,” CoinGecko co-founder Bobby Ong claims.  

Back in August, Blockchain Transparency Institute (BTI) published a report where trading volumes on the most popular exchanges are compared to other metrics (including website traffic). They’ve concluded that these fraudulent exchanges get 83 percent of their referral volume from CoinMarketCap, which serves as a great incentive to artificially increase their volumes.

Hence, a great number of website visitors on SimilarWeb is not indicative of how transparent this exchange is. Not to mention that some of these exchanges can also buy cheap website traffic.    

Still, another report by CryptoExchangeRanks (CER) suggests that it could be useful to check their social media and community activity in order to gauge the real popularity of a certain platform.                  

Researcher Concludes $3 Bln of Cryptocurrency’s Daily Trading Volume Faked

95 percent fake

The recent Bitwise report which revealed that 95 percent of Bitcoin trading volume is fake was a sobering experience for the crypto community. Very few exchanges, such as Coinbase Pro, actually play fair and square. Some Chinese exchanges have a bid-ask spread of more than $300 dollars, which means that the lion’s share of their trading volumes is inflated by wash trading.

Before the Bitwise bombshell, there had been numerous other studies that showed how shamelessly neophyte crypto exchanges are striving to make it to the top of CoinMarketCap.

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About the author

Alex Dovbnya (aka AlexMorris) is a cryptocurrency expert, trader and journalist with extensive experience of covering everything related to the burgeoning industry — from price analysis to Blockchain disruption. Alex authored more than 1,000 stories for U.Today, CryptoComes and other fintech media outlets. He’s particularly interested in regulatory trends around the globe that are shaping the future of digital assets, can be contacted at