A comprehensive Bitwise report that was submitted to the US Securities and Exchange Commission (SEC) that put the issue of fake volumes on crypto exchanges under the spotlight also provided a sound and clear answer on the true issue: a lack of transparency on crypto exchanges.
The complex relationships between token issuers or project owners and crypto exchanges, not to mention the data aggregation sites that look at market capitalization and trading volumes show that any data produced is difficult to verify and therefore, makes it very dubious for investors who already have a hard time dealing with the asset’s volatility.
A Forbes article points out that this three-party relationship’s worst and most noticeable repercussion is the “absurd volumes” on a majority of crypto exchanges.
It is worth noting that the Bitwise report was in fact only a comment to the SEC, in which it cited the “dramatic improvements” in the Bitcoin spot market and arbitrage strength, although also stressed that 95% of exchange volume was likely falsified due to wash trading.
So even though the positive takeaway was that Bitcoin’s efficiency in the spot market was better than generally expected, the huge problem was that of the lack of transparency among most crypto exchanges.
The report scraped live trading data from 83 exchanges and 73 failed at least one of their tests for real trading volume, reporting this as “10.5 billion dollars out of the 11 billion dollars in reported daily volume (or – 95%) is either fake or wash trading”.
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