Bitwise Calls Out to SEC: 95% of Bitcoin Trade Volume Is Fake, Real Market Is Or

Approximately 95% of reported BTC trading volume is fakeAs part of the research, Bitwise analyzed trading data of some 83 exchanges.

Bitwise classifies the 10 exchanges as real volume exchanges or reference exchanges.

As expected, there were questions raised about the reliability of the Bitwise study considering that these popular exchanges aren't regarded as real volume exchanges.

Bitwise pointed out that the trading data of the three exchanges doesn't follow that of Bitwise's real volume exchanges.

Using the data above, the average daily volume of these three exchanges would have increased the volume of legitimate trading in the Bitwise study from $554 million to $622 million.

Bitwise did recognize the use of algorithms in crypto trading by pointing out that the average price deviation of 0.12% across its real volume exchanges is within the arbitrage band, adding that the trend "Suggests that institutional-quality arbitrageurs and algorithmic programs are in place that monitor the system and identify and capitalize on any pricing discrepancies to constantly keep the prices closely together."

First of all, pointing to a downward trend in the average deviation of bitcoin's price on its 10 reference exchanges from the consolidated price in the broader market, research claims that the quality of the bitcoin spot market has improved.

The introduction of bitcoin futures in December 2017 has attracted bigger traditional market players to the crypto space and has so far made the market more organized, according to Bitwise.

When the SEC rejected an ETF application by the Winklevoss brothers last year, it expressed concerns that regulated derivatives markets such as the bitcoin futures market are small relative to the spot market.

By showing that the spot market is significantly smaller than often reported, Bitwise pointed out that the size of the bitcoin futures market is almost as large as the bitcoin spot market.