Messari, a crypto analytics firm, recently announced one of its newest products, “Real 10 Volumes”, an index for 10 digital money exchanges. As a result, it will now limit all of its default calculations on volume to the numbers given by these trusted exchanges. These select few include Binance, BitFlyer, BitFinex, Bitstamp, Coinbase Pro, Bittrex, ItBit, Gemini, Poloniex and Kraken.
In their explanations, Messari defends its position on the “Real 10” on reports of the exchange’s “significant and legitimate trading volumes via their APIs.” The firm, however, is in the next few months open to adding more exchanges who have clean book data.
Uneconomic Trade Volumes in Exchanges
Earlier this year, Bitwise, in their research findings concluded that at least 95 percent of the volume on most unregulated crypto exchanges was ‘non-economic.’ They went on to state that “under the hood the exchanges that report the highest volumes are unrecognizable. The vast majority of this reported volume is fake and/or non-economic wash trading,”
As expected, a lot of new crypto trade platforms have emerged not only to meet the need but to profit from the expansion currently going on in the digital currency market. It has become apparent however that some of these newcomers are according to their trading volume figures, doing way better than the established and community trusted exchanges. Lbank, CoinBene, BitMax, ZB.com have all reported higher trading volumes than Binance, BitFinex or Kraken. Such statistics have raised a lot of eyebrows especially after the Bitwise Asset Management report on the high levels cooked data prevalent in the crypto market.
This data has further been reinforced by The Tie, that has asserted that at least 90 percent of crypto exchanges do report incorrect data. The team behind the crypto trading platform went on adding:
“If each exchange averaged the volume per visit of CoinBase Pro, Gemini, Poloniex, Binance, and Kraken, we would expect the real trading volume among the largest 100 exchanges to equal $2.1 (billion) per day. Currently, that number is being reported as $15.9 (billion).”
Why Not Use Blockchain Data?
The beauty of cryptocurrencies and their data is that it runs on blockchain, the epitome of financial transactions transparency. ViewBase took advantage of this strength and analyzed Ethereum wallets on exchanges. They hoped to find reasonable balances proportional to an exchange’s trading volumes. They like the above two reports found glaring disparities.
As per their data, the larger and older exchanges were definitely still on the lead. However, newer exchanges like KuCoin and Huobi had more ERC20 coin balances possibly because they are well known as altcoins exchanges. All things considered, the top exchanges in trade volumes were Binance, Kraken, Huobi, Bittrex, FCoin, BitFinex, Kucoin and Poloniex.
While wash trading is a significant factor when it comes to misleading volume data, algorithmic trading bots could also cause a misreporting. Thanks to rising fraud it is also possible that investors no longer want to store funds in an exchange’s wallet. Alternatively, high volume data may be brought on by an exchange’s bid to raise the volume. BitForex, for instance, practices ‘transaction mining’ that not only gives them better returns but also ends up pumping their volumes.
However, at the end of the day, false data reporting puts traders, especially those who move large volumes at high risk. As Changpeng Zhao CEO Binance said, an exchange will”get new users….BUT at the expense of DESTROYING CREDIBILITY with pro users.”
History, however, has shown that exchanges that heavily rely on old fashioned credibility and trust will crumble under the deception and secrecy prevalent in the crypto-sphere. Blockchains, however, are inherently transparent through the ability for investors to understand and analyze their data could be a hindrance to the data’s use. Exchanges, though, should endeavor to report blockchain backed data to ensure healthy trade practices.