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51% Of Regular BTC Volume Are Fake: Truth Behind The Statement

A new report asserts that amid volatile global economic conditions, more than 51% of the total volume of Bitcoin trading on various cryptocurrency exchanges this year is fake. In the brand-new and highly volatile cryptocurrency markets, Bitcoin is the most valuable cryptocurrency and accounts for 40% of all unique crypto assets. At the moment, its market cap is 382.25 billion.

But what’s the truth behind the statement? Let’s find out as we decipher the different aspects of the process and the market.

Wash Trading: Another Dark Reality Of The Crypto Market?

Wash trading, in which an asset is purchased and sold on the same platform to create a false sense of liquidity, is against the law. Bots or order spoofing are frequently used for wash trading. It means entering into transactions to show that sales and purchases have been made. 

However, they do it without sustaining market risk by the U.S. Commodity Futures Trading Commission. Pervasive wash trading, a type of fake volume, and inadequate exchange-to-exchange surveillance are two of the most common criticisms against bitcoin.

More Than 50% Fake Crypto? True Or False

Exchanges also benefit from wash trading because they appear to have more volume, but don’t, which may encourage more legitimate trading.

Even among the most reputable research organizations in the sector, there is yet to be a universally accepted method for calculating bitcoin’s daily volume. For instance, CoinMarketCap estimates that the most recent 24-hour bitcoin trading was $32 billion, CoinGecko estimates $27 billion, Nomics estimates $57 billion, and Messari estimates $5 billion.

The public collapses of Voyager and Celsius highlight persistent concerns regarding the solvency of cryptocurrency exchanges, which adds to the difficulties. For example, FTX’s CEO Sam Bankman-Fried stated in an exclusive Forbes interview at the end of June that numerous exchange bankruptcies are still to come.

The rejection of a spot bitcoin ETF by the Securities and Exchange Commission is a significant consequence of the lack of faith in its underlying markets.

Sadly for bitcoin ETF contenders, numerous concerns and criticisms are legitimate. The 60 best exchanges were ranked in March as part of Forbes’ research into the crypto ecosystem using data from 2021.

The majority of all reported trading volume is likely fraudulent or non-economic. For example, on June 14, according to Forbes, the industry’s global daily bitcoin volume was $128 billion. That is 51% less than the $262 billion obtained if the total volume self-reported from various sources was considered.

The largest stablecoin in the world, Tether USDT 0.0%, continues to dominate the cryptocurrency trading industry, particularly in transactions against bitcoin. Despite concerns regarding its reserves, it currently has a market capitalization of $68 billion.

The 33 exchanges ranged from $200 million to $999 million across all contract types—spot, futures, and perpetual—regarding the amount of bitcoin activity at these businesses: 21 cryptocurrency exchanges bring about $1 billion in daily trading activity.

The Role Of Tether

Tether plays a significant role in Spot Bitcoin trades because stablecoins account for most trades. However, a substantial portion of trades also involve fiat currencies like the U.S. dollar, Japanese yen, and South Korean won.

The USDT stablecoin, or the U.S. dollar itself, accounts for more than 90% of Bitcoin’s liquidity. Additionally, significant non-dollar demand originates from Turkey, Europe, Japan, South Korea, and South Korea. It also discovered that spot and futures trading accounts for most Bitcoin trades. 

573 Million People Visit Crypto Websites Monthly

Companies like Binance, MEXC Global, and Bybit, which tout large volumes but operate without regulatory a framework that would make the figures credible, pose the greatest threat to fake volume. Our study’s less-regulated exchanges are responsible for around $89 billion (or $217 billion) of the actual volume.

National authorities attempting to regulate cryptocurrency markets face additional challenges due to creating new trading assets and products like perpetual futures and stablecoins.

These contracts and instruments are rarely used in trading on major U.S. exchanges. However, because they cannot open U.S. bank accounts, offshore exchanges make extensive use of them to generate U.S. dollar liquidity on their platforms artificially.

It’s tempting to think that bitcoin only trades against U.S. dollars, Euros, or the British pound in the Western world, especially the U.S. However, some of the most active trading pairs are against vital stablecoins like the USD coin and Binance U.S. dollar, as well as against fiat currencies like the Korean won and Japanese yen. In addition, around 573 million people visit cryptocurrency exchange websites every month.

Truth Or False?

According to the published report, one factor that encourages individuals to engage in wash trading is the capacity to raise the price of a particular item. This is done for personal gain by artificially raising the asset’s price before selling it for profit. 

Exchanges can deceive investors into thinking that their platform has more activity and liquidity by giving the impression of being more popular than they are. Therefore, traders should exercise caution when dealing with exchanges that display fictitious data. After researching the exchange site, you only trade with platforms or exchanges you are confident in.

Propping up the price of a specific asset is yet another reason individuals might engage in wash trading. They can create the appearance of demand and drive up the price by simultaneously purchasing and selling the asset. Again, it can be done for one’s benefit or to artificially raise the price of an asset before selling it.

Investors should avoid exchanges that provide inaccurate figures. The report advised that you must conduct research and only utilize trusted exchanges.

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