Bitwise Tells US SEC That 95% of Volume on Unregulated Crypto Exchanges is Suspect

95 percent of volume on unregulated exchanges appears to be fake or non-economic in nature, an analysis from cryptocurrency index fund provider Bitwise Asset Management has argued in a report dated March 20.

Bitwise reported its data and claims to the United States Securities and Exchange Commission as part of a proposed rule change for its application to launch a Bitcoin Exchange Traded Fund.

"Under the hood the exchanges that report the highest volumes are unrecognizable. The vast majority of this reported volume is fake and/or non-economic wash trading."

Bitwise sources its data from the widely-cited crypto statistics tracker CoinMarketCap, which it claims includes a large amount of this suspect data, "Thereby giving a fundamentally mistaken impression" of the true size of the Bitcoin market.

Bitwise claims that roughly 95 percent of reported volume is fake and that the real market for BTC is thus "Significantly smaller, more orderly, and more regulated than commonly understood" - amounting in reality to $273 million.

Bitwise first analyzes regulated exchanges - using Coinbase Pro as a case study - to reveal the nature of the trading patterns it deems to be trustworthy.

Coinbase Pro reported around $27 million in daily traded volume of BTC at the time of Bitwise's analysis - as compared with $480 million reported by Coinbene.

Suspect signs include an implausibly perfect alternating pattern of green and red trades, and a lack of round number or small value trades.

Suspect exchanges also reportedly demonstrate consistent volume 24-hours a day, as opposed to regulated exchanges, where volume corresponds to waking and sleeping hours.

As reported this week, new research from trading analytics platform The Tie proposed that almost 90 percent of crypto exchanges' reported trade volumes - of all supported cryptocurrencies - were false.