Most top exchanges are inflating their volume; wash trading

14 Dec, 2018
by Arthur Sillers
Most top exchanges are inflating their volume; wash trading

Research suggests that most crypto exchanges are engaging in a price manipulation, wash trading, and a number of bot strategies aimed at inflating volume numbers, according to the Blockchain Transparency Institute, which has been looking into this behavior for at least the last 3 months in increasing detail. The newest report indicates that the of the 'top 25 exchanges by volume,' only 2 do not distort their numbers.

The first two reports, which came out in August and November, respectively, found clear evidence of wash trading among a number of exchanges across a number of trading pairs. The newest research continues to probe deeper on the specific trading pairs which appear to be manipulated, and claims to have discovered a number of specific strategies which exchanges use to manipulate pricing and volume data in order to capitalize on the hype surrounding a coin, and in order to differentiate their exchange over a competing one.

According to the Institute, only Binance and Bitfinex appear to not engage in behavior which artificially increases apparent volume among the top 25 exchanges. These inflations are also massive, to the point that the top exchanges by volume in reality are quite different from those listed on Coinmarketcap. The Institute has calculated the actual top 10 exchanges by BTC volume, several of which are not in the top 25 at all according to Coinmarketcap and similar aggregators.

The problem isn’t Coinmarketcap’s, but of course the listing on their site motivate the behavior in the first place, as the publishing of competing volumes makes inflating exchange volume attractive in the first place. The news comes as a reminder that crypto is awash in fraudulent behavior, and the crypto community has not figured out how to police it. Whether crypto will be able to stamp out fraud and distortion in its market itself or whether regulation will try to reduce it from the top is still an open question.

Read more: AriseBank founders hit with ICO fraud charges and ordered to pay $2.7M in fines

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