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Trading analytics platform The TIE has released a report that reveals that nearly 90% of trading volume on cryptocurrency exchanges is incorrectly reported.
Crypto trading volume has been at its lowest in 2 years, but if most exchanges are faking their volumes, it is likely to be even lower than reported.
The TIE followed up on their analysis on Twitter, saying that there was a discrepancy in reported trading volumes:
If each exchange averaged the volume per visit of Coinbase Pro, Gemini, Poloniex, Binance, and Kraken, we would expect the real trading volume among the largest 100 exchanges to equal $2.1 (billion) per day. Currently that number is being reported as $15.9 (billion).
The company posted a series of tweets that expanded on their findings.
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🔍🧐 Cryptocurrency exchange trading volume investigation 🧐🔎
Our team set out to determine whether volumes reported on cryptocurrency exchanges were genuine.
Thread Follows:
The data: https://t.co/w3bILdQ2Yw pic.twitter.com/V6nmi6hGx8
— The TIE (@TheTIEIO) March 18, 2019
They first selected the top 100 exchanges by trading volume, after which they examined the amount of traffic visiting each of these exchanges. The team accounted for the fact that this approach does not consider mobile or API trading.
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While website viewership metrics don't account for API or mobile app trading, they do provide a good basis of comparison across exchanges to identify suspicious reported volumes.
For example, while #Binance reported $750 traded per visit, DOBI reported a whopping $356,625
— The TIE (@TheTIEIO) March 18, 2019
The following comparison between monthly traffic and volume depicts the discrepancy:
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The chart below shows reported trading volumes per exchange vs. monthly web visitors. While exchanges like #Kraken, #Binance, and #Coinbase show similarities between viewership and trading volume, others like Coinbene and ZBG have suspiciously high reported volume vs. views. pic.twitter.com/7Q0jBRNj9Y
— The TIE (@TheTIEIO) March 18, 2019
Of course, this by itself isn’t conclusive proof, so The TIE calculated the average trade per web visit, after taking a weighted average of trading volumes across Binance, Coinbase Pro, Poloniex, Gemini and Kraken.
They calculated the average trade per visit to be worth $591, and from this figure, a discrepancy arises from the number of visits and reported trading volumes.
Misreporting financial data is something that has happened before and it’s clear that the cryptocurrency market is still plagued with such issues. In December 2018, the Blockchain Transparency Institute reported that over 80% of the top 25 BTC pairs on Coinmarketcap was wash traded. Another piece of BTI research found that wash trading affects 67% of crypto trading volume.
If mainstream adoption is to become a reality, the industry has to address these issues in order to build trust with users.