95 Percent Of Bitcoin Trading Is Fake; According To New Study By Bitwise
Charles Bovaird, a writer for Crypto & Blockchain, posted an article with the title above to the March 22, 2019 online edition of Forbes.com. He begins by noting that “While many use CoinMarketCap as a go-to resource for crypto-currency market data, roughly 95 percent of bitcoin trading volume reported by this [that] website — is fake,” according to a new report from Bitwise Asset Management.
CoinMarketCap reports “approximately $6 billion per day, in daily active bitcoin trading volume; but, the actual figure is $273M, or roughly 4.5 percent of the reported amount,” according to Bitwise.
Mr. Bovaird provided an Editors Note: “Investing in crypto-coins, or tokens is highly speculative, and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.”
“When conducting its analysis, Bitwise culled data from 81 exchanges, which it selected, based on reported bitcoin trading volume,” Mr. Bovaird wrote. “Exchanges that reported less than $1M worth of volume per day – were excluded.”
Mr. Bovaird wrote that “several analysts weighed in on the implications of the report’s broader implications.” “If true, it’s clearly not a positive for the industry,” emphasized Tim Enneking, Managing Director of Digital Capital Management. However, “most of the largest exchanges appear to have a much lower level of ‘fake’ volume, so the 95 percent number is hardly evenly spread across exchanges,” he added.
Mr. Enneking “outlined several reasons why exchanges would inflate their [bitcoin] volumes,” Mr. Bovaird wrote: “Other than simply wanting to make volume appear larger than it is for commercial reasons (the greater the volume, the easier it is to attract even more traders) three other factors may play into the motivations behind exaggerated volumes: 1) The generalized decline in volume in the past twelve months or so, makes appearing to be larger more important, and more difficult; 2) The growing volume in OTC (over-the-counter) platforms, which both exacerbates, and accelerates the first problem; and, 3) the seemingly endless proliferation of new exchanges, meaning that more players are fighting for larger pieces of a smaller pie.”
The Short List Of Trustworthy Exchanges
“Single digital currency exchanges are struggling to overcome these headwinds; and, have significant incentive to inflate their trade volumes, investors may find that only a small volume, investors may find that only a small number of these marketplaces provide reliable information,” Mr. Bovaird wrote. “There is a short list of [digital currency] exchanges, with a good reputation,” said John Hargrave, of Bitcoin Market Journal.
“Of the 81 exchanges evaluated in the report, only 10 provide volume figures that are legitimate,” according to Bitwise.
“Industry heavyweights such as Coinbase, were included in that list,” Mr. Bovaird wrote.
“These appear to be the quality [digital currency] exchanges that have done due diligence,” Mr. Hargrave said.
One thing not mentioned in this article is the fact that 90 percent of all bitcoins are owned by one percent of the owners. Couple that, with the fact that the digital currency market is not regulated, and this is fertile ground for manipulation, both to the downside, as well as upside. The retail investor is almost completely absent. This is not a domain that I feel comfortable dabbling in; and, it isn’t for the faint of heart. I still stand by by projection of two years ago or so that — if an when we adopt digital currency for the majority of our transactions — the value of a bitcoin or whatever digital currency we’re using, is likely to be much closer to $1, as opposed to +$3K. Just one man’s opinion. RCP, fortunascorner.com