Blockchain Transparency Institute (BTI) has reported some shocking data six months after launching its BTI Verified program, which tracks and verifies accurate reporting of cryptocurrency exchange volumes. The platform noted that within this period, they recorded a substantial decline in wash trading figures as many exchanges cooperated with the research institute.
What is Wash Trading?
Wash trading refers to a market manipulation practice where an investor simultaneously buys and sells the same financial instrument to propagate an artificial and misleading market activity. Wash trading is done for several reasons including:
- To artificially pump the trading volume of a target instrument, which makes the underlying instrument look more in demand than it is in reality.
- To create commission fees for brokers as compensation for shady dealings.
BTI noted that since 2019, the volume of wash trading globally has dropped by over 35% among the 40-largest crypto exchanges. The research institute noted that its data-sharing practice with these exchanges has equipped the platforms with better mechanisms for detecting wash trading accounts and shutting them down.
Exchanges with the Most Wash Trading
The blockchain research organization revealed that the exchanges with the least wash trading (cleanest exchanges) over the last six months included Kraken, Poloniex, Coinbase, and Upbit. Also, it revealed the exchanges among the Top-40 with the highest wash trading percentages were OKEx and Bibox, with each exchange exceeding the 75% mark.
By country, the research institute revealed that Japan and the United States had the cleanest exchanges. This is likely a result of the legal and regulatory standards maintained in these countries. However, BTI asserted that regulatory factors do not entirely determine the cleanliness of exchanges as is seen, citing South Korea as an example.
The organization revealed its latest BTI Verified exchanges, which included Binance (under 10%), Gemini (under 10%), Bitflyer (under 5%), and Indodax.
Source: Blockchain Transparency Institute
BTI Accuses CoinMarketCap of Inadequate Vetting of Listed Exchanges
The BTI report claimed that CoinMarketCap still listed numerous scam exchanges on its Top-10 “Adjusted Volume” rankings. The research organization listed several crypto exchanges with notable wash trading, including LBank, BW.com, Bit-Z, Coinbene, and OEX, noting that these platforms have wash trading rates as high as 96.9% to 99.7%.
Source: Blockchain Transparency Institute | Fake Volume Ranking by BTI
BTI blamed the persistence of such trends on CoinMarketCap, noting that the cryptocurrency aggregator ranks exchanges without running basic checks, creating an incentive for crypto exchanges to report false data to rank higher. The report detailed that among the Top-100 exchanges listed on CoinMarketCap, 73 of them have wash trading volumes over 90%.
The report also detailed that these exchanges publish ghost orders and trade executions to bump their perceived volume.
In the images below, we can see what transpires when a trader places a sell trade using a market order on an exchange with ghost orders. There are visible flash movements, between 20-50%, on a single candlestick with a suspiciously unchanged volume. This is a clear indication of the order books getting filled up with ghost or shadow liquidity. Such charts, as seen with OEX below, are common with over 70% of exchanges on CoinMarketCap’s Top-100 “Adjusted Volume” rankings.
Source: Blockchain Transparency Institute | OEX Fake Liquidity
Source: Blockchain Transparency Institute | LBANK Fake Liquidity
The platform noted that it recently launched a Hotwire email that warned token projects about shady crypto exchanges trying to secure listing fees from projects by publishing fake volumes. BTI revealed that it had 700 token projects on its list, and it was adding more. The report further names BitMax and P2PB2B as exchanges trying to extract about $100,000 for token listing by publishing false data.
Source: Blockchain Transparency Institute | Fake Volume on BitMax
Source: Blockchain Transparency Institute | Fake Volume on P2PB2B
Most Wash-Trades Cryptocurrencies by BTI
By analyzing data from the verified Top-40 exchanges by reading volume, BTI concluded that Bitcoin (BTC) was being easy traded by about 50%, Ethereum (ETH) at around 75%, Ripple (XRP) at 55%, and Litecoin (LTC) at 74%.
The report also noted that Ethereum Classic (ETC), Monero (XMR), and Dash (DASH) are the most wash-traded tokens on the BTI Top-25 exchanges at over 80% fake volume. Meanwhile, the report revealed that Maker Dao (MKR), Binance Coin (BNB), and LEO are the least wash-traded tokens in the Top-25 exchanges at under 25% each.
BTI Report Shows Stablecoins are Also Wash-Traded
According to the BTI report, Stablecoins were not exempt from wash trading this year, with USDT — the largest Stablecoin by trading volume — being wash-traded at 67.3% on the Top-40 exchanges over the past 90 days.
USDC, the second-largest and fastest-rising Stablecoin coin, had one of the lowest wash tradings globally, with a value under 7% in the past three months. Meanwhile, TUSD was wash-traded by 12, while PAX was at 13.7% based on data from the Top-40 exchanges. Finally, DAI — the fifth-largest Stablecoin— was wash-traded at 30.2% among the Top-40 exchanges.
Source: Blockchain Transparency Institute | Stablecoin Wash Trading
BTI noted that though notable strides had been made in upholding best practices in the crypto market over the last year, a lot of work still needs to be done. The research organization noted that false trading volumes alter the real image of the market, thereby misleading investors.
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