Research: Fake Trading Volumes Persist; An Exchange Copies Binance Order Books

Self-reported volumes and other forms of monitoring still cannot distinguish whether trading activity is organic.

Exchanges are still faking their trading activity to misrepresent how liquid they are and thus invite more real users, discovered recent research by FTX cryptocurrency derivatives exchange.

The new research points to the fact that on average, up to 72.2% of volumes could be faked. Alameda Research has partnered with FTX to produce the data. The new arrangement of the current leading exchanges suggests that previous research by Bitwise Asset Management may be exaggerating the fake volumes. Bitwise focused on the fiat market for Bitcoin (BTC) and concluded the data suggested a small, real, well-regulated market.

However, the biggest problem remains - the activity of exchanges relying solely on crypto-to-crypto trades. Those volumes are harder to track, and there have been speculations that market operators participate in trading to boost prices but also to place spoof orders.

Alameda Research also listed several techniques for generating volumes and filling up the order books. Forbes reported a discrepancy in the order books of exchange BKEX, where trading volumes were replicating some of the orders on Binance.

Other exchanges have deliberately placed large-scale orders among ordinary activity, to boost the impression of carrying large-scale trades. Alameda has noticed alarming trading patterns on 60 exchanges tested. Alameda believes the self-reported results collected by CoinMarketCap in its transparency initiative are still misleading, and order books reveal more worrying signs of artificial activity.

But even with bad behavior and faked orders, real volumes worldwide for all digital assets may be more than $38 billion in 24 hours, as per the data collected by Alameda. Around 87% of those volumes are concentrated on Asian exchanges, and only 8% on the US markets. The tighter regulations and delisting of coins has diminished the share of US-based exchanges, of which there is only a handful. China, however, has returned as a powerhouse of trading, boosting BTC gains in the past few weeks.

For most of the leading coins, exchange activity is relatively predictable. Only a handful of assets make up more than 50% of all activity. The highest liquidity is seen for BTC, Ethereum (ETH), and of course Tether (USDT), the leading dollar-pegged coin.

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