The Fake Volumes of Crypto Exchanges: how to spot a suspicious exchange?

The Fake Volumes of Crypto Exchanges

The crypto community (you can buy and sell bitcoin online at or at the Lurdy ATM) had to face a bit of a reality check in the past couple weeks concerning the exact trading volume of bitcoin. And the facts that have surfaced are astonishing. While a lot of people claim that crypto exchanges using fake volumes has been a bit of an open-secret in the community, the scale of the fake volumes is still something that surprised some. But what is the truth? How big is the daily volume of bitcoin trading? How much of the previous data was correct? Was any of it even real?

Fake volumes: the numbers don’t check out

The biggest and most frequently cited site that was thought to display up-to-date data about bitcoin and other cryptocurrencies was Not only everyone in the crypto community used it to look up certain numbers and figures but the biggest mainstream publications have also relied on the site. And when we say big and mainstream, we mean big and mainstream: examples include The Wall Street Journal and The New York Times – both respectable publications that can’t afford to lose the credibility they built up over the decades to lazy fact-checking.

But apparently credibility and fact-checking only goes so far. When the crypto exchanges lie about their figures, ordinary traders and journalists can’t really do anything against it. Change is coming though – and fake volumes will not be tolerated the same way they were before.

The Fake Volumes of Crypto Exchanges: how to spot a suspicious exchange?

You might ask: but how can crypto exchanges lie about their volumes? Isn’t it all out in the open for everyone to see?

You’re right about that last one – it is there for everyone to see. And this is exactly why we know that they’re lying about their volumes.

Don’t believe anything you see – or at least a good 95% of it

On 19th March, Teddy Fusaro, the COO, and Matt Hougan, the Global Head of Research of Bitwise has made a presentation to the US Securities and Exchange Commission (SEC) about their exact findings of the fake transactions. And what they started with was a staggering number. According to them, 95% of the daily bitcoin trading volume is fake. Yeah, you read that right: 95%.

In their presentation, they made a comparison between the real and fake volumes by looking at trade histories of different exchanges. Usually these trade histories include red and green trades: green for buying and red for selling.

Now, if we look at all the little red and green entries, we should be seeing a random distribution of selling and buying orders. Naturally, sometimes there are periods in trading when more people are selling their assets, while other times the opposite will be true. But overall, the trades should be completely random. After all, if the trades are real transactions, they should reflect the behavior of thousands and thousands of different people.

And that’s what we see with the real exchanges. Sometimes buying orders dominate the trade histories, sometimes the selling does, but it is always random.

Now, if we look at CoinBene’s history (which was brought up as an example by Fusaro and Hougan), we will see the complete opposite of a random distribution. It’s almost always one green and one red, followed again by one green and one red. Does that sound possible with real trades? Not really.

No small trades, only major ones

But this is just one major red flag they pointed out – and there are many more. Another problem they found about fake trade volumes was that in a lot of cases, the small trades were completely missing. There are exchanges that apparently never have people trade less than $1000 worth of BTC. On the other hand, the real exchanges often have bids as low as just a couple of dollars. Where are all these people on the other exchanges? Maybe nowhere – or maybe the exchanges are simply lying about the transactions.

Where are all the round numbers?

As we mentioned already, real trading is carried out by real people. And when something is completed by people, it reflects human behavior. And what do people usually do when they trade? They trade in round numbers. Why would someone trade 0.092 BTC instead of trading 0.1 BTC? Surely, there are situations when you choose fractions for completely justifiable reasons: maybe all you have left in your wallet is 0.092 BTC.

But in a lot of cases, human behavior is predictable: people prefer to trade in round numbers – and they do. So how is it possible that some exchanges just seem to have the same amount of round number orders as they have for all the others? To go a step further, Fusaro and Hougan have compiled histograms to visualize the distribution of the different amounts of the selling and buying trades. Not only were the round numbers underrepresented in these, some of the curves showed data that are simply impossible to believe. One curve showed the bell curve of normal distribution, while another had a steadily increasing curve. The two crypto experts call these “suspicious” exchanges – that might be an understatement as the histograms completely goes against typical human behavior.

Traders do sleep sometimes – but not at the exact same time

Another fairly interesting and, again, very suspicious trend they have noticed was in case of RightBTC, a crypto exchange that reportedly has over $100M average daily trading volume. In case of this exchange, they found that there were several hours and sometimes even days when there was absolutely no trading activity. We don’t even have an attempt of an answer for this: this is simply not possible if the real trading volumes were the same as the reported ones.

It’s also interesting to look at the spreads of these suspicious exchanges. Some of them have spreads between the selling and buying prices that are reportedly over $300 – compared to the couple cents that the exchanges with the real volumes offer.

The real volumes are much lower – they also make way more sense

All the data shown here seems to be quite astonishing at first glance. But it actually makes a lot of sense if we really look into what all this means exactly. As the report mentions in the beginning, fake volumes probably take up around 95% of all daily transactions. This means that the real daily volume is closer to $273 million instead of the previously recorded $6 billion.

Bitcoin’s current market capitalization is around $70 billion dollars. Meaning that if the fake volumes were correct, 8.6% of all bitcoin would be changing hands every single day. But if we consider the suspicious exchanges to be fake volumes, this percentage is quickly down to 0.39%. Now, if we compare this to gold that has a daily trading volume of 0.55% of its whole market cap, the figure seems to check out. Isn’t that a way more reasonable number? We seem to think so too.

We can clearly see from the data and findings that these suspicious looking exchanges are almost certainly presenting fake volumes. They are, simply put, completely unreliable as exchanges. This is why it is important to not only look at the daily trading volumes when we choose an exchange we’d like to use. Yes, we might think that big volumes mean big and reliable exchanges – but if the majority of those transactions are fake, then we might be getting into more trouble than if we were to choose a smaller but way more reliable crypto exchange.

At Coinmixed, we can promise you this: what you see is 100% real.

Don’t fall for numbers simply – fall for real data.

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