FAKE Crypto Trading!? What It Means For The Markets!!

One of the main reasons why institutions Have been wary about getting into crypto Is because of all the fake trading Volume on cryptocurrency exchanges which Was as high as 95 in 2019 Although fake trading volume has been on The decline over the years a recent Report by forbes found that up to 50 of Bitcoin trades are still fake Foreshadowing some serious issues for The crypto market Today i’m going to summarize what the Forbes report found and tell you what Effects it could have on the crypto Market in both the short term and the Long term this is a video you do not Want to miss The report i’ll be summarizing today is Titled quote more than half of all Bitcoin trades are fake it was published Late last month and i’ll leave a link to The article in the description if you’re Interested note that it is behind a Paywall but it can be viewed in other Ways dyor Now the report begins with a brief Introduction wherein the author javier Paz reveals his bias by calling bitcoin A quote gateway drug to the crypto Market which is kind of funny given that It’s meme coins like dogecoin that have Been attracting the average investor and These are arguably much more like drugs Than btc

In any case javier then drops a sweet Statistic and that’s that around 46 Million americans hold btc along with a Growing number of institutional Investors and corporations He then poses an admittedly important Question and that’s quote can you trust What your crypto exchange or e brokerage Reports about trading in the most Important digital currency He then goes on to explain what wash Trading is and why it’s done the tldr There is that wash trading is when the Same entity is executing buy and sell Trades for the same asset on an exchange Basically just trading with themselves Now this is often done to give the Illusion of legitimate trading volume Which can attract investors to specific Coins or tokens or attract new users to A crypto platform Now obviously wash trading is very Illegal and any individual or Institution who engages in it eventually Gets wrecked by regulators Now javier makes an important point and That’s that it’s actually very hard to Accurately measure btc’s trading volume And cites all the different trading Volumes reported by popular crypto price Tracking sites like coin gecko and even Crypto analysis sites like massari He then points out that the inability to Accurately quantify btc’s trading volume

Is the primary reason why the sec Refused to approve a spot bitcoin etf Which does make sense Speaking of which you can find out why The approval of a spot bitcoin etf is so Important using the link in the Description i digress The piece goes on to detail a massive Crypto study conducted by forbes which Analyzed 157 cryptocurrency exchanges and gives a Short summary of the seven key findings Of the study The first of these findings is that Quote more than half of all reported Trading volume is likely to be fake or Non-economic And this makes me wonder what javier Means by non-economic He doesn’t provide a definition nor Detail how much of all crypto trading Volume is non-economic versus fake Now the second finding is that tethers Usdt continues to play a central role in Crypto trading despite all the questions About its reserves the third finding is That the overwhelming majority of all Crypto trading volume be it spot or Futures occurs on the top two dozen or So exchanges with binance and ftx as the Front runners overall The fourth finding is that most of the Fake trading volume is taking place on Unregulated exchanges which is not

Surprising i’ll also reiterate that Javier seems to lump in fake trading Volume with non-economic trading volume For the rest of the article so take These statements with a grain of salt The fifth finding is that stable coins New cryptocurrencies and novel ways of Trading make it difficult for regulators Around the world to set rules for the Crypto market The sixth finding is that a substantial Chunk of crypto trading volume happens Against non-western currencies like the Japanese yen and the korean one which is Again not surprising given that these Countries are known for being crazy About crypto or so i’ve heard The seventh finding is that almost 600 Million people visit crypto exchange Websites every month which is an Insanely bullish statistic we’re all Gonna make it guys Now the author ends this section of the Report by citing the same report i cited At the start of the video which found That 95 of all cryptocurrency trading Volume was fake back in 2019. i’ll leave A link to that report in the description Too if you’re interested Anyways the second part of the forbes Report describes how its researchers Analyzed the trading volume of the 157 Cryptocurrency exchanges and the author Starts by saying they used quote

Quantitative and qualitative analyses to Adjust trading volume reported by the Exchanges This is another small but significant Detail because quantitative analysis Involves stuff like crunching numbers And qualitative analyses typically Involve a small number of case studies That don’t focus on the numbers too much If at all Now this again makes me wonder how much Of each methodology forbes researchers Used in their analysis especially since Additional details about the methodology At the bottom of the report note that Quote Forbes has conducted dozens of Interviews of senior executives at major Crypto exchanges to supplement Quantitative information on a firm’s Profile so They asked exchange ceos about trading Volume instead of looking at the Reported numbers it’s honestly not very Clear What is clear is that the researchers Use data from quote coin market cap coin Gecko nomics and massari as well as Multiple exchanges and two other Third-party data providers I wonder which exchanges and third-party Data providers these are now javier goes On to note the following quote we apply Volume discounts based on a proprietary

Methodology that relies on 10 factors Such as an exchange’s home regulator if Any and volume metrics based on an Exchange’s web traffic and estimated Workforce size We also use the number and quality of Crypto licenses as proxy to gauge the Sophistication of each crypto exchange In matters pertaining to regulation and Trade surveillance More importantly quote If a firm shows a commitment to Transparency by conducting token proofs Of reserve or by participating in forbes Crypto exchange surveys it qualifies for A transparency credit that lowers any Discount that may otherwise apply This is important to know because while It makes sense to look at things like Web traffic and workforce size looking At the track records of different Regulators the quality of crypto Licenses and especially participation With forbes’s surveys to determine real Trading volume is clearly a bit Odd Now in any case the author goes on to Divide the 157 exchanges forbes analyzed Into three groups based on this Particular trading volume discount Criterion The first group consisted of 48 Exchanges which had trading volume that Was up to 25

Fake the second group consisted of 73 Exchanges which had trading volume that Was between 26 and 79 percent fake And the third group consisted of 36 Exchanges which had trading volume that Was 80 to 99 fake i’ll reiterate that The authenticity of this trading volume Is based on forbes’s questionable Trading volume criteria Even so i must admit that the final list Looks fairly accurate In case you can’t see the exchanges with 100 real trading volume according to Forbes include the likes of binance us Coinbase ftx us gemini and kraken At the other extreme you have exchanges With more than 95 fake trading volume And i must admit that i don’t recognize Any of these except one which i will not Name for obvious reasons I definitely suggest digging up this List if you get the time to make sure The exchange you’re using is legit if You’re feeling lazy you can just refer To our video about the top five Regulated cryptocurrency exchanges that Will be down in the description if you Need it Anywho the third part of the forbes Report consists of a series of Interesting charts and tables and the Author commences by commenting on usdt’s Continued dominance in crypto trading on The spot market as you can clearly see

Here note that the leftmost column is Usdt and that this is for btc only For anyone who can’t see or is just Listening in btc usdt is the most common Btc trading pair followed by btc usd Which is actual us dollars btc busd Which is binance’s stablecoin and btc Usdc which is circle stablecoin that’s Quickly becoming the de facto cbdc Digital dollar the author then zooms in On the second most common trading pair For btc which is of course btc usd and Here you can clearly see the Discrepancies between the self-reported Trading volume of cryptocurrency Exchanges compared to the quote forbes Real volume estimate It’s the same story with btc usdt As for btc usdc you can clearly see that It’s not nearly as popular as the former Two trading fairs but the author still Makes sure to note that quote if Tether’s prominence begins to wane usdc Could be the stablecoin most likely to Pick up its crown Javier then goes on to examine bitcoin Trading volume on exchanges and it Should come as no surprise that binance Has the most btc trading volume by a Wide margin and that this is even after The 45 trading volume deduction by Forbes researchers This puts binance in group two according To the author’s criteria which is why

You don’t see it in the group one Infographic which is led by ftx followed By ok x and crypto.com Binance’s dominance is even more Apparent when compared to its colleagues In group two Now the author doesn’t even bother to Provide an infographic for group three Because quote their huge self-reported Volume and tiny visitor number cast Doubt on the possibility that a limited Audience could indeed generate that much Trading activity The next infographic shows you exactly How many web page visits the exchanges In each group had and you can clearly See that the exchanges in group 3 got Almost no visitors in april this year Which is when the web data was gathered The author then zooms in on the popular Bitcoin trading pairs after btc usdt and Btc usd which are Btc kwr btc jpy Btc usdc and btc eur as expected south Korean exchanges account for most of the Btc krw trading volume and japanese Exchanges account for most of the btc Jpy trading volume What’s not as expected is that Relatively unregulated offshore Exchanges account for most of the btc Usdc trading volume and that kraken Binance and coinbase account for most of The btc eur trading volume

The author then shows the same bitcoin Trading volume infographics at the start Of the section but with a breakdown of Exactly which btc trading pairs make up That volume for both spot markets and Futures markets interestingly most of The spot btc trades on binance happen Against usdt and binance’s btc usdt Trading volume is almost the same as Ftx’s btc Usd spot trading volume which makes up The lion’s share of its bitcoin trading Volume It’s a similar story for perpetual Bitcoin futures with most of the btc Futures trading on binance happening Against usdt whereas almost all of it Happens against plain old usd Over on ftx though in this case buybit Comes in second slightly ahead of ftx The author ends this section by looking At the distribution of trading volume For traditional futures where cme group Reigns supreme with btc usd and okx Comes in second with mostly btc usd Futures trading I’ll quickly note that leverage trading Is a big part of why the crypto market Has seen so much volatility lately and If you’re wondering what mechanics are Involved in things like liquidations you Can check out our video about the Dangers of leveraged trading using the Link in the description

Anyhow the final part of the forbes Report provides some key takeaways and The first one is a no-brainer quote Bitcoin may just be the beginning of the Problem in other words the fake trading Volume could be much higher for other Cryptocurrencies and honestly it Probably is Call me crazy but this seems to be a not So subtle message to institutional Investors to stay away from altcoins For context institutional investment in Altcoins seems to have taken off during The last crypto market cycle This also seems to be a not so subtle Message to regulators like the Securities and exchange commission or Sec which appears to be looking for any And every excuse it can to crack down on All coins The second takeaway is quote binance Remains the 800 pound elephant in the Room meaning that it’s still the largest Exchange by trading volume even when you Subtract 45 percent in accordance with Forbes criteria something that’s Obviously a problem if forbes’s Estimates are true The author acknowledges that binance has Been working with regulators around the World but cautions that the absence of a Global headquarters and adequate Oversight means quote it may be Difficult to envision a spot etf getting

Approved anytime soon i suspect it’s This sentence that attracted the Attention of finance ceo changpeng zhao Who noted on twitter that binance has no Incentives for faking its trading volume As it’s already the largest exchange by Such a wide margin fair point On that note some of you may recall that Binance invested 200 million dollars in Forbes earlier this year This makes the subtle shade javier Throughout binance that much more Interesting as it suggests he isn’t Being pressured to report in a Particular way due to the massive Investment Either that or there’s bigger money Behind the anti-binance narrative but Let’s not go there Now the third takeaway is especially Spicy and that’s quote tether remains Too big to fail for now this study Invites more questions about the true Use and value of two of the largest Stablecoins usdt and busd Here javier once again underscores the Concerns about the assets backing usdt Which have actually improved in quality Since we last examined the assets Backing stablecoins last year still that Doesn’t stop him from making the Outlandish claim that quote it is hard To imagine what would happen to markets If traders stopped trusting tether and

To be fair there is little evidence that This is happening and none of its Competitors were willing to take its Place Now that last bit is a tad ironic given That he noted earlier on that circle’s Usdc is poised to replace tether’s ustt It’s also strange that he doesn’t Explain why he singled out busd as a Stable coin that has questions around Its quote true use and value That’s probably because there isn’t that Much that can be said there Yes busd is binance’s stablecoin but it Is technically issued by paxos a fully Regulated company based in the united States that seems to have a much better Track record than other stablecoin Issuers at least as far as reserves go The author finishes the report by Highlighting three areas for future Study which are fairly straightforward The first is market manipulation via Stablecoins which the researchers Apparently didn’t find evidence of To be exact quote we did not see any Evidence that tether-based trading pairs Were any more prone to fraud than other Assets make of that what you will The second area for future study is Market manipulation in perpetual futures Which the researchers again apparently Didn’t find any evidence of More accurately quote we did not see any

Evidence that perpetual futures are more Prone to wash trading and other forms of Manipulation than conventional futures Or spot contracts once again this is Open to lots of interpretation The third area for future study is Certain to be exciting and that’s market Manipulation on decentralized exchanges Which the researchers didn’t collect Data about The author notes that the day is coming Soon though because uni swap has more Trading volume than coinbase on some Days So this brings me to the big question And that’s what this forbes report means For cryptocurrency Well there’s no denying that the author Is right when he says that the sec Probably won’t be approving a spot Bitcoin etf until btc trading volume can Be accurately quantified and most of it Is found to be real There’s also no denying that the level Of fake trading volume for all coins is Probably much higher and this could Create serious problems for institutions Wanting to allocate to altcoins not just On the liquidity front but the Regulatory front as well Besides that though the forbes report is Actually pretty bullish for crypto That’s because it effectively confirms That the amount of fake trading volume

On exchanges has declined significantly Since 2019 and recall that the recent Trading volume on exchanges was Calculated using forbes’s questionable Criteria What this means is that the fake trading Volume on cryptocurrency exchanges could Actually be much lower than what forbes Is estimating and i think this is Especially likely for the larger Cryptocurrency exchanges like binance And ftx Regardless it suggests that fake trading Volume is on the decline The forbes report is also bullish for Crypto because it highlights the Importance of transparency if you Watched our video summarizing a hearing In the united states about illicit Activity in cryptocurrency from earlier This year you might recall that Exchanges are a sort of black box for Information Only the exchanges know their real Numbers and they’re not too keen on Sharing these numbers for several Reasons be they regulation or Competition Now don’t get me wrong this isn’t a good Thing it’s actually a very bad thing The thing is that cryptocurrency Exchanges are not actual Cryptocurrencies they’re centralized Intermediaries that crypto is supposed

To eventually replace using yep you Guessed it Decentralized exchanges That’s why i’m excited to see what the Forbes researchers will find when they Start analyzing dexes i’m sure they’ll Find all sorts of price manipulation Pump and dumps rug pulls and the like But i’m also sure they’ll find lots of Legitimate trading volume and market Dynamics that are more cohesive and Healthier than what you find on Centralized exchanges and it’ll all be Out in the open for analysis This is all in the long term though in The short to medium term this forbes Report is likely to turn heads in Regulatory agencies around the world Many of whom probably thought they had Crushed fake trading volume on Cryptocurrency exchanges during the Previous bear market Given that the sec has historically Engaged in a lot of enforcement action At the end of its fiscal term in September we could see some seriously Concerning crackdowns on centralized Exchanges later this month and some Would say this makes this forbes report A perfectly timed hit piece i mean it’s The mainstream media after all what else Did you expect And that’s all for today’s video about Forbes’s crypto exchange report if you

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