Bitwise Claims 95% Of Reported Bitcoin Trading Volume Is Fake
A majority of Bitcoin trading volume is artificially created by unregulated exchanges, according to a Bitwise Asset Management report.
Bitwise, which earlier this year proposed a Bitcoin exchange-traded fund (ETF), submitted this report to the U.S. Securities and Exchange Commission (SEC) as part of its application process.
While CoinMarketCap, one of the most popular sources of crypto trading information, says the Bitcoin market’s average daily volume is roughly $6 billion, Bitwise argues that, going by the firm’s own methodology, the actual average daily Bitcoin trading volume is only $273 million.
The report analyzed Bitcoin trading data over four days in March, across 81 cryptocurrency exchanges. Specifically, Bitwise looked for patterns that show real and artificial trading, concluding that 95% of the reported trading volume of these exchanges were questionable, including “patterns that indicated the trading on them appears manufactured.”
“The fact that a significant portion of the reported daily volume in Bitcoin is demonstrably fake will be unsurprising to many in the industry. Market participants have long understood, and experienced first-hand, that a substantial portion of reported volume is fake. This report is simply the first time that the data has been comprehensively assembled and analyzed to formally corroborate those anecdotal suspicions,” said Matthew Hougan, Bitwise’s head of global research.
The firm says that when ignoring the fake volume, the Bitcoin market appears to be efficient, arbitraged and regulated.
However, Bitwise argues that the Bitcoin “futures market is significant” when viewed in light of the remaining, genuine 5 percent of spot trading that occurs at regulated exchanges.
The average daily futures volume on two major Chicago-based exchanges, CME and Cboe, combined totals near $85 million, which is not too far off from the average daily spot volume of $110 million on Binance, the exchange which performs the largest number of legitimate trades, according to Bitwise.
The SEC has already explained that an ETF proposal must show that either the underlying market for a fund is “uniquely resistant to manipulation,” or that there is a regulated market of significant size. Bitwise’s report tried to demonstrate both, Hougan added.
The SEC will make an initial decision on whether to approve, reject or extend the review period for Bitwise’s ETF proposal sometime within the next week, with a legally-mandated deadline at the end of March.
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