There is no doubt that with the development of the cryptocurrency market, many new users have become traders. As a result, the daily volume of transactions in certain cryptocurrencies, in particular bitcoin (BTC) continues to grow. However, can we really believe the figures that are put forward by digital asset exchanges? As surprising as it may seem, the answer is no according to a study carried out by Forbes.
The wash trading method to inflate the numbers
Of all the cryptocurrencies that exist, bitcoin (BTC) is the best known and most used. This is not surprising, since it is the first crypto to have been invented. Furthermore, it represents 40% of $1 trillion in digital assets in circulation. Bitcoin (BTC) is therefore very popular. Moreover, according to the New York Digital Investment Group, 46 million American adults already have it.
Regularly, traders as well as crypto exchanges publish data about the volumes of transactions carried out with digital assets. However, according to a study conducted by Forbes, these data are not necessarily trustworthy. The magazine gives two reasons: the wash trading (1) and weak monitoring of crypto transactions (2).
According to the US Commodity Futures Trading Commission, wash trading is defined as “the act of entering into, or pretending to enter into, transactions to give the impression that purchases and sales have been made”. This method allows traders to give the impression that an asset has a strong following, by inflating the volume of transactions. But in reality, the magazine points out, “in some cases, these transactions are executed by robots without using crypto”. With wash trading, digital asset exchanges also give the impression of having more volume than they actually have.
The conclusions of the study
At present, there is still no universally accepted method for determining the daily volume of bitcoins (BTC). Because of this, even the data published by the most reputable research companies is not always reliable. For all these reasons, the Security and Exchange Commission keep showing a lack of confidence with regard to the crypto markets.
Unfortunately, this lack of confidence seems to be justified. Indeed, by taking an interest in the subject and conducting its study with 157 stock exchanges, Forbes discovered that:
- More than half of all reported trading volumes are likely to be false ;
- Despite questions about its reserves, tether (USDT) has a market capitalization of $68 billion and remains a dominant player in the stablecoin market;
- The biggest concerns about fake trading volumes come from big companies like Binance, MEXC Global, and Bybit, which operate with little or no regulatory oversight.
In a recent study by Forbes, we learn that some of the advanced data for transaction volumes of bitcoin (BTC) and other cryptocurrencies are not always reliable. Cryptocurrency traders and exchanges inflate the numbers to make it look like they have big volumes.
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