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New research is casting even more doubt on the legitimacy of bitcoin trading.
An analysis published by Bitwise this week shows that 95 percent of bitcoin spot trading is faked by unregulated exchanges. The survey, first reported by The Wall Street Journal, echoes concerns by regulators that cryptocurrency markets are still ripe for manipulation.
Bitwise - Asset - Manager - Process - Bitcoin
Bitwise, an asset manager in the process of trying to list the first-ever bitcoin exchange traded fund, said it met with the Securities and Exchange Commission on Tuesday to discuss its application. As a part of the process, it submitted analysis that could help regulators cut through the noise.
"People looked at cryptocurrency and said this market is a mess, that's because they were looking at data that was manipulated," said Matthew Hougan, global head of research at Bitwise. "When you cut away the echo chamber of these nonsense numbers, it should be an efficient, well-arbitraged market."
Analysis - Volume - Exchanges - Trading - Term
The analysis showed that "substantially all of the volume" reported on 71 out of the 81 exchanges was wash trading, a term that describes a person simultaneously selling and buying the same stock, or bitcoin in this case, to create the appearance of activity in the market. In other words, it's not real.
Those exchanges report an aggregated $6 billion in average daily bitcoin volume. The study finds that only $273 million of that is legitimate.
Idea - Volume - Time - People - Exchanges
"The idea that there's fake volume has been rumored for a long time, we were just the first people to systematically look at which exchanges were delivering real volume," Hougan told CNBC.
The San Francisco-based firm compared at Coinbase Pro, which reports about $27 million in average daily volume in bitcoin. Its median "spread," or difference between the price a seller wants and the price a buyer wants, for bitcoin was about 1 cent. That scenario passed Bitwise's test for...
(Excerpt) Read more at: CNBC
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