en
Back to the list

The fallacy of trading volume


Daniil Danchenko

According to the various prophecies - cryptocurrencies have a massive future in front of them and today that doesn’t sound like just random rumbling on the internet. From a beginning of this very year amount of money involved in ICO and blockchain project only grew in size. Which in turn made the crypto industry grow like on steroids.

Good trading rates, high position in the rates, and overall great start, while older and more robust platforms are biting the “dust” - that's all the things you can see about new cryptocurrency exchanges. And that, for obvious reasons, creates certain amounts of jealousy and thoughts about something being off here. Maybe “new guys” inflate their trading volumes to get ahead in the rates of websites. But is it a jealousy-fueled paranoia, or there is a ground behind it?

Lets have a bit of fun with numbers and count!. If we are talking about something small time, an exchange that claims that their daily trading rates are around $3 mln. Such exchanges usually have a moderate amount of unique users - around 2 to 3 thousand people. So basically that means that average trading amount of money is around a thousand USD, which is not something impossible.

Authors from a blog called CryptoExchangeRank did the similar research. They matched statistics of the new exchanges that suddenly started to scale up the charts, which made them a center of attention - BitForex, BCEX, BigOne

An indepth analysis of BitForex, cryptoexchange that is ahead of KuCoin and Kraken shows that they have a small number of users, they are relatively unknown, but their trading volumes are huge-two or three times higher than said KuCoin and Kraken. If you use available stats - you can see that BitForex amount of unique users is around 30 000. KuCoin has 889 000 unique user count, and Kraken has 666 000 behind its belt. That means that they have 30 and 20 times more unique users and smaller ratings. How is that possible?

Let’s take Binance, relatively well-established exchange with a decent reputation - their average trading per person is around a thousand USD. Moreover, Bitforex statistics tell us that their average is number is 12. One of the most plausible and realistic explanations - someone on the exchange is using the “wash” scheme, circular orders when someone is placing the orders and fills them, which means that said person moves his money from a right pocket to the left one.

We are not going to claim anything or judge anyone, from the high standpoint of journalism ethics that is just wrong and we can only suspect that they are using this inflated volume to lure new traders in, in a sense - a marketing ploy. Cryptoindustry needs new clients, and inflated volumes attract them, creating a skewed picture of the market’s liquidity.

However, such actions are pure gasoline for the bonfire of uneasy thoughts. Yes, higher rates mean - higher traffic, higher traffic means more potential customers, but there is a question. Where is the difference between such a trick and outright fraud?

Because of such “marketing ploys” recently released review of the Binance (Binance is relatively new on the market), the first year does not seem all that “bright and sunny” as they claim. Maybe they are doing the same thing, only more carefully and hide it well.

Cryptoverse can talk about “Banksters” and “inhumane business” all what they want, but if we will take some of the industrial giants in the offline world - Gazprom, Mitsubishi, BMW etc reviews are far more believable. Simply because they have numerous regulators ready to ready to go for their jugular as soon as they have even a small slip-up. We won’t call out anyone, again - for the sake of the ethics of the journalism and avoiding highly speculative topics, but is is a fact, that some of the “Good and established” exchanges are not entirely free of any controversies.

When Bitnewstoday.com asked BCEX and BitForex about this matter - they refused to give any comments.


Back to the list