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BTI report: Binance and Bitfinex are the cleanest top exchanges

Posted: 17 December 2018 6:57 pm
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100% unadulterated, genuine, honest-to-goodness homemade trade volume

The Blockchain Transparency Institute (BTI) has published a new salvo of wash trading allegations, pointing at 23 of the top 25 cryptocurrency pairs by volume. Of the top exchanges by volume according to CoinMarketCap, BTI's methodology found that only Binance and Bitfinex are all natural, while the worst of the bunch appear to be less than 1% real volume.

Note that it may be worth applying a grain of salt to the findings as the data used to reach these new conclusions is not public, and there are a few small question marks around some of the assumptions underlying previous findings. Still, that there's some shadiness and wash trading in the crypto space is probably beyond doubt.



Why fake volume?

The main point of this fake volume, BTI says, is so that exchanges can charge excessive listing fees to cryptocurrency projects that are desperate for liquidity, and the average project on these exchanges has spent over $50,000 this year on listing fees.

"This adds up to an estimated $100,000,000 stolen in 2018 from the crypto ecosystem… and with over 50 exchanges wash trading over 95% of their volumes, this is a 500K a year scheme, with some exchanges making over one million dollars this year just from collecting these fees," BTI says.

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It's worth noting that charging listing fees is in itself not a bad thing, and it's standard practice for even the cleanest exchanges as a lot of work tends to go into new listings. These can vary widely though, and BTI says it has received reports of listing fees on legitimate exchanges ranging from 2 BTC to 75 BTC.

But some exchanges are taking it to excessive levels, according to the report, existing solely to cash in on these listing fees while the exchanges are being ploughed by almost nothing but bots.

"We also found many of these exchanges to be preying on low market cap coins which are desperate for the recognition and volume of a top 10 or 25 exchange. In many of the crypto projects we spoke with, this also involves supplying the exchange with a large amount of tokens which are then used to massively inflate volume numbers on CMC, luring in prospective traders from other exchanges with much lower, but real volume," the report explains.

It's also worth noting that some of the exchanges that, according to the report, are wash trading still rank among the highest real-volume exchanges. In fact, HitBTC and Huobi, which BTI claims might be wash trading the majority of its BTC:USDT trading volume, still rank exactly the same (six and seven respectively) in both the CoinMarketCap and BTI volume rankings.

Other top exchanges that according to BTI have 100% real volume include Coinbase Pro, Kraken, Upbit, Poloniex, Bittrex, Kucoin, CEX.io and, more locally to Australia, BTC Markets and Cryptopia.

The main takeaway (assuming BTI's analysis is accurate) might be that once you strip away the alleged wash trading there's a huge gulf between the top exchanges and the rest. Binance and Bitfinex are both the top dogs by a significant margin, which makes a lot of sense. Binance handles the retail crypto traders while Bitfinex takes care of the high rollers. Cryptocurrency is a global technology, and most people are probably looking for similar qualities in their exchanges. Where there are no borders and minimal frictions, it's not enough to be good – you have to be the best.

The cryptocurrency exchange business is enormously competitive and with markets as tight as they are, it seems increasingly likely that there will be a major contraction at some point down the line. While BTI suggests that some of the more egregious appearances of wash trading are from exchanges that exist solely to collect listing fees, it might be equally likely that some started with the best intentions before being driven to wash trading and picking up listing fees by the tightening markets and user outflows.


Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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