A new FORBES analysis of 157 cryptocurrency exchanges concludes that a high percentage of reported daily Bitcoin trading volume is likely fake.

Within the emerging and turbulent cryptocurrency market, where there are no less than 10,000 tokens, Bitcoin is the great grandfather, the blue-chip, which represents 40% of the trillion dollars in crypto assets in circulation. Bitcoin is the gateway to cryptocurrencies.

An estimated 46 million American adults already own it, according to the New York Digital Investment Group, and a growing number of institutional investors and companies are taking a liking to this fledgling alternative asset.

But can what any crypto exchange or electronic brokerage is reporting about trading the biggest digital currency be trusted?

Bitcoin Criticized

One of the most common criticisms of Bitcoin is widespread wash trading (a form of fake volume) and poor surveillance on exchanges.

The United States Commodity Futures Trading Commission defines wash trading as “the making, or purporting to make, of transactions to give the appearance that buying and selling have taken place, without incurring market risk or changing the operator’s market position’.”

The reason some traders do wash trades is to inflate the trading volume of an asset in order to give the appearance of increasing popularity. In some cases, trading bots execute these wash trades in tokens, increasing the volume, while at the same time insiders reinforce the activity with bullish comments, driving the price up in what is effectively a pump and dump scheme.

Wash trading also benefits exchanges because it allows them to appear to have more volume than they actually do, potentially encouraging more legitimate trading.

Conclusions of the Forbes Analysis

These are the conclusions of the study on 157 cryptocurrency exchanges worldwide:

1. More than half of all reported trading volume is likely to be fake or uneconomic.

2. Tether, the world’s largest stablecoin, remains a dominant player in the cryptocurrency trading economy, especially when it comes to Bitcoin trading. Its current market capitalization is $68 billion, despite doubts about its reserves.

3. In terms of the amount of Bitcoin activity taking place at these companies, 21 cryptocurrency exchanges generate $1 billion or more in daily trading activity, while the next 33 exchanges had between $200 million and $999 million dollars in all types of contracts, spot, futures and perpetual. Binance is the undisputed leader, with a market share of 27%, followed by FTX.

4. The biggest problems when it comes to fake volume are companies that tout high volume but operate with little or no regulatory oversight that would make their figures more credible, especially Binance, MEXC Global, and Bybit.

5. The creation of new assets and trading products, such as stablecoins and perpetual futures, add complications to national authorities trying to regulate cryptocurrency markets.

6. In the Western world, and in the United States in particular, it is tempting to think that bitcoin only trades against the US dollar or the euro and the British pound. But some of the biggest trading pair activity is against fiat currencies like the Japanese yen and Korean won and major stablecoins like Binance’s US dollar and USD coin.

7. An estimated 573 million people visit crypto exchange websites on a monthly basis.

As usual, the best advice is to do your own research before making major decisions.

By Audy Castaneda

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