Fake Volumes: New Crypto Exchanges Displaying Signs of Inflated Activity

New exchanges are showing trading activity that is disproportionate to their user numbers and social media presence.

Brand-new exchanges are showing extremely robust trading volumes, lining up among top marketplaces and way above established older platforms. This has led to further accusations of attempts to gain visibility in CoinMarketCap’s exchange rankings through faked volumes.

A back-of-the-envelope calculation for small exchange IDEX reveals that daily volumes are around $2.9 million. IDEX has between 2,000 and 3,000 users each day, according to data from Dapp Radar. This comes to average trading of around $1,000 per person, which is not a far-fetched amount.

Researchers at the CryptoExchangeRank blog did a similar calculation by matching visiting statistics with the volumes of several new exchanges presented on CoinMarketCap. In the past weeks, platforms like BitForex, BigOne, and BCEX have risen in the ranks, triggering suspicion.

An analysis of BitForex, which landed above KuCoin and Kraken, shows that a small number of users on a relatively unknown exchange are extremely active traders, achieving volumes between two and three times higher.

“From the numbers we received, we see that the number of UU of BitForex is 29K. In turn, Kucoin has 889K unique users. Kraken has 666K unique users. KuCoin’s number of UU is 30 times higher than that of BitForex, Kraken’s number of UU is higher by 23 times,” CryptoExchangeRank said.

Additionally, BitForex still has just about 2,000 Twitter subscribers, while older exchanges have hundreds of thousands. This factor reveals that the organic spread of BitForex is much smaller.

The new batch of exchanges is mostly used for up-and-coming tokens and ICOs, and listings are announced with much fanfare in an attempt to mimic a Binance, KuCoin, or Huobi listing, which are significant factors in ensuring trading activity.

In the end, the high rankings of the exchange send more traffic to BitForex. Still, the researchers have concluded that the trading is not organic:

“BitForex forges trading volumes to stay on the very top of the rating and draw the attention of crypto investors and new users. However, they have certain issues with processing and converting traffic into users as there is no clear policy regarding interaction with the audience. As a result, the exchange doesn’t have a large number of real supporters and loyal community on social media, Telegram, or email.”

Crypto asset trading continuously attracts new users, and forged volumes tend to create a skewed picture of how much real liquidity there is on the markets.

Total average monthly volumes per user also reveal that while someone on Binance may trade less than $1,000 per month, the average for BitForex is more than $12,000. Some believe this is due to wash trades - circular orders where the same person places and fills them. The analysis shows that faked volumes are most probably a marketing ploy aimed at attracting real buyers.