Bitwise submitted a report to the SEC as part of their ETF application which claims that 95% of all reported Bitcoin trading is fake.

When you look at various cryptocurrency exchanges, the trading amounts being reported can be staggering. It seems that many exchanges are as busy as beehives as traders eagerly buy and sell Bitcoin, but that perception may be false. Bitwise has submitted an ETF application to the SEC and has included an in-depth report on Bitcoin trading. Their conclusion is that a staggering 95 percent of all BTC trading is fraudulent.

Massive Bitcoin Trading Study

The report submitted by Bitwise is essentially composed of 226 slides that examine 81 cryptocurrency exchanges from all over the world. The criteria for the study was to use exchanges that reported over $1 million in BTC volume on CoinMarketCap.

When examining the various exchanges, Bitwise used three different factors in their evaluations: trade size histograms, volume spike alignment, and spread patterning analysis. These metrics can easily be measured, and some interesting patterns emerged.

Many exchanges that reported high average daily volume (ADV) had statistics that ran counter to what one would expect to see, such as no notable volume spikes that would correspond to the market’s movement and having spreads that are extremely high, which would not occur in a high volume environment.

Staggering Conclusions

The Bitwise report makes some staggering conclusions. First is that 95 percent of all Bitcoin trading is fake. Another is that only 10 of the 81 researched exchanges reported their actual volume. These 10 exchanges are: Binance, bitFlyer, Gemini, Bitfinex, Kraken, itBit, Bitstamp, Bittrex, Coinbase, and Poloniex. Overall, the actual trading volume for Bitcoin is only $273 million and not the reported $6 billion.

The reason for this false trading volume reporting? Money. As the report states:

Volume inflation is familiar to any self-reported league table (dark pools, etc.). But in crypto, the incentive to inflate volume is pernicious and strong: Exchanges that appear at the top of the lists used by leading media organizations can attract listing fees (often millions of dollars) from ICOs and alt coins.

However, the Bitwise report says the lower trading volume is actually good news. The report says that BTC’s trading volume is pretty close to that of gold. BTC has a daily turnover of 0.39 percent while gold has a daily turnover rate of 0.55 percent. If the fake trading is taken into account, the BTC rate would skyrocket up to 8.6 percent. The actual percentage shows stability.

The majority of the 10 legitimate cryptocurrency exchanges are regulated, which should help soothe some of the SEC’s fears. Also important is that the value of BTC/USD corresponds to BTC/USDT if you make adjustments for fluctuations in USDT/USD prices.

Overall, the study finds that there is a lack of market manipulation in Bitcoin price (a major concern of the SEC) and that almost 30 percent of all Bitcoin trades originate in the USA. Perhaps this report may finally convince the SEC to give the okay to the Bitwise ETF.

What do you think about this report from Bitwise? Do you think that most BTC trading is fake? Let us know in the comments below.

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