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Research by Bitwise Asset Management rocked the cryptography industry this week after concluding that 95% of reported bitcoin transaction volume is false.
However, this may not be such a bad thing that it can spur the industry to tidy its business and traders to avoid dishonest trading.
Based in San Francisco, Bitwise is a respected player in the
the space having placed on the market the first cryptographic index fund and its Bitwise 10 index,
which follows the large-cap crypto, is widely followed.
In January, he announced that he had tabled a proposal to
United States Securities and Exchange Commission (SEC) for a physically backed bitcoin
exchange-traded securities and, as part of ongoing discussions with the regulator,
has just shared with it its conclusions on the true state of the crypto-trading markets.
Bitwise badyzed trading on 81 stock exchanges and found that
trading volume at 71 of the total was suspicious, according to a Wall Street
Newspaper report.
Watch four days in March using software
specially developed for this task, Bitwise concluded that out of the $ 6 billion reported
daily volume on coinmarketcap.com, the main market data site, a tiny fraction
was actually real – $ 273 million.
Its results are consistent with previous badyzes of other research.
companies. Crypto Integrity calculates counterfeit trade at 88%, while TIE estimates 75%
as suspect.
Suspicious Trade Models in Bitcoins (BTC)
Comparing trading patterns on regulated exchanges such as
Coinbase, Bitflyer and Gemini with unregulated sites, there were some marked
differences.
For example, transactions on regulated exchanges comply with
models that have seen marked lows in the trade when traders in the busiest
time zone markets could fall asleep. Unregulated trade tended
do not have such hollows (and peaks).
Other suspicious models concerned discrepancies between purchases
and selling prices, which tended to be much wider in unregulated markets,
in some cases up to $ 300 – this can be considered as an indication of the low
liquidity and high volatility.
There is also a notable lack of small deals in the market.
unregulated trade and exchange in rounded numbers, which would tend to indicate
a human behind the run, tends to miss too.
Significantly, there was also an indication of mbadive washing
trade. It is a technique that inflates the volume of exchanges by making simultaneous
buy and sell orders that cancel each other out but seem to add
trading volume.
The Wall Street Journal contacted an unregulated exchange,
Coinbene, which, like its unregulated peers, reports trading volumes
much larger than regulated exchanges, for a response to Bitwise
results.
The Bitwise report showed that over the days studied,
CoinBene reported a daily volume of $ 480 million, up from $ 27 million
Coinbase, the popular American exchange. CoinBene did not answer.
Dishonest volume
reports – what about manipulation?
Alexa website traffic Ranks CoinBene 55.097th
and Coinbase 1500th , which makes the commercial figures at the same old
more inexplicable.
It has long been postulated that the lack of market
Trade monitoring means that they are largely open to manipulation.
Since unregulated trade is not themselves
opposed to inflating their transaction volumes, it is more likely that they
are not going to be too bothered by other illegitimate business practices that
are prohibited in other clbades of badets.
Insider trading, cornering a market and parody, where
Orders are placed but not executed to give the impression of a strong buying interest
in a particular market that for the same operator to open orders in the opposite direction
direction that are executed in order to take advantage of the price increase encouraged
parodic professions.
Exchanges have an interest in exaggerating their daily lives
volume figures so their companies are more attractive to new looking cryptobadets
for ads. Some exchanges also accept fees for the registration of coins.
Sift
fiction is a good thing
Bitwise research has been interpreted negatively by some
as another reason why the Wild West crypto will struggle to generate
substantial institutional interest.
However, the triage of the facts of fiction is surely a
welcome developments that bring transparency to the market.
In his ETF proposal, Bitwise says it will take prices
data from regulated exchanges and his research was aimed at communicating the
validity of this approach for the regulator.
Instead of reporting Bitwise search in Doom-load
as CNBC, MarketWatch and Barron did, this should be welcomed
signs that at least some of the industry are capable of a serious attempt to
self-regulation, or at least willing to call those who are happy to
bring traders (and lists) for a ride.
Coinmarketcap needs to clean up its data
And since reports of inflated transaction volumes are far
again he also raises the question of what coinmarketcap does to clean his
The data?
Why does he always report trading volumes for players like CoinBene?
which are clearly inaccurate if not downright fraudulent?
Go to the cryptocompare.com data site and have a look at
the daily trading volume for BTC – it was $ 1.17 billion at the time of writing.
In the coin market, it is supposed to be $ 8 billion.
Most market participants quote data from coinmarketcap, which
last week hit a 12-month high of $ 11 billion for daily bitcoin trading
volume.
At one level, the number does not matter so much
the percentage of change to monitor. Maybe, but for a serious badet
clbad having such highly variable data points for the same markets shows the
problem faced by regulators, and those seeking approval from crypto ETFs.
Vote with our feet and flee the quacks
Here's a solution – only take regulated trade data.
And traders might want to do the same and start fleeing the
exchanges that invent things. If you can not trust them not to wash the trade
on their own exchanges, it's probably not a very good idea to trust them with
your money.
Bitwise has served the SEC and the CFTC. If they did not have
have already reached the conclusion – namely to exclude all exchange data
and take the awards only on regulated exchanges – so hopefully, Bitwise
helped them to consider a clearer path for the approval of an ETF.
Regulators should take Bitwise's approach as a model –
base price only on those prevailing on regulated exchanges.
They should also treat unregulated wildcards beyond the
blade. Of course, not all unregulated trade is handled honestly.
management teams, but it will encourage honest people to seek regulation for
Avoid being tarred by the same brush of dishonesty. This will have the overall
the effect of making trade fairer and safer while speeding up the approval of crypto ETFs.
And come on coinmarketcap – start making an effort to report
more precise data.
Why not ask the exchanges to explain the strange trading
models taken over by Bitwise's software?
Maybe tell them that they're not setting up a market
monitoring or independent reports, their data will not be referenced? the
perspective of the removal of their coinmarketcap swap could focus
minds of trade management and entice the worst offenders to change
their manners.
Bitcoin futures – forget the CBOE
Finally, if we want to eliminate 95% of trades as garbage,
he's starting to make bitcoin futures markets settled in much healthier cash
than badumed otherwise.
With this in mind, the Chicago Board of Exchange (CBOE) may have been a little hasty in deciding to freeze the news
contracts – another news that has been perceived as a shadow on
Bitcoin outlook.
However, while CBOE has reported lower volumes,
largest competitor, the Chicago Mercantile Exchange (CME), set a record
trading, with 18,000 contracts negotiated on February 19, which represents a record
high. Each CME contract represents 5 BTC, while the CBOE contract is a BTC.
So in other words, the CME dollar volume was $ 360 million
February 19th. This compares very favorably with the $ 273 million a day
estimated volume per bit, averaged over four days in March.
Bitcoin CME CF and Bitcoin reference rates in real time
Index takes its data from four exchanges: Bitstamp, Coinbase, itBit and Kraken.
CME has even made public the methodology underlying the exchange of constituents
selection, which is still available here.
The CBOE bitcoin futures are, however, based on a single exchange,
Gemini daily auction price, which some say is lower than the price of the CME.
composite data approach.
CME has published all the research used in its selection
CBOE did not disclose any published research.
Much higher volumes in bitcoin futures indicate that
institutions and commercial enterprises prefer the more robust CME product. CBOE should
maybe have put a little more work into their offer.
But the main reason why we should not take CBOE
product is too serious because it is cash-settled (like CME), so it does not
In fact, the price of bitcoin is affected because the contract does not come with bitcoin.
The only future bitcoin settled to date has been announced by
CoinFLEX and will trade in the Asian market.
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