Wash Trading One of Bitcoin’s Worst Criticisms

Since the inception of the crypto space, Bitcoin has retained its position as the world’s leading digital asset. With a market cap nearing $400B the token comprises a noteworthy ~40% of the $1T global market cap of all cryptocurrencies. 

BTC has begun to experience rising levels of institutional adoption. With more than 220 million users worldwide holding some crypto token and majority owning BTC, Bitcoin has effectively cemented its status in mainstream conversations.

However, Forbes’ analysis casts doubt on the validity of BTC’s trading information from various leading exchanges.

Critics often point out that exchange companies fail to properly supervise the trading activity on their platforms. Additionally, Bitcoin has gotten tons of bad press through the years due to the frequency of wash trading. According to the US Commodity Futures Trading Commission wash trading is;

Entering into, or purporting to enter into, transactions to give the appearance that purchases and sales have been made, without incurring market risk or changing the trader’s market position.”

Exchanges Benefit From Wash Trading

Wash trading entails traders creating false market activity by engaging in a series of buys and sells. The goal is usually to raise the trading value to increase the asset’s appeal. Forbes noted in their analysis that the practice can be beneficial to exchanges as well.

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

After probing into 157 crypto exchange platforms, Forbes received results that showed 51% of BTC’s daily trading activity was false. The report placed the daily BTC volume for June this year at $128 billion. However, this stands in stark contrast with trading data from other external sources who, Forbes claim, set the value at $262 billion. 

Other Details of the Study

According to the study, Binance, Bybit, and MEXC global are some of the biggest contributors to the issue of fake volumes. The report stated that these platforms claim to facilitate a significant amount of transactions. However, as they operate without adequate regulation, the validity of their claims falls into question. 

Forbes noted that there is no universal way to ascertain Bitcoin’s daily volume. This limitation affects even the crypto industry’s top analysis platforms, they claimed.

Forbes’ investigation yielded some other interesting findings. To start with, the report stated that the leading stablecoin network Tether is one of the crypto space’s biggest players. The total market cap for the stablecoin currently rests at about $68B despite its contentious reserves.

The report also negated the misconception that BTC trading pairs with USD, Euro, or Pounds are typically the only ones formed. Interestingly, a large volume of trading pair activity involves the Japanese Yen and Korean Won as well as some major stablecoins.

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