Chainalysis Says BitForex Trading Volumes Could Be Fake

BitForex exchange could be faking its bitcoin trading volume, according to a report released Friday by crypto auditors Chainalysis.

For every one bitcoin recorded entering on-chain between January and November, BitForex claims some 40,000 bitcoins trades traded, the Chainalysis report said.

"There should be a relationship with the bitcoin moving onto the exchange and how much it is traded," Philip Gradwell, chief economist for Chainalysis and compiler of the report, said.

The Chainalysis report comes as crypto entities apply more pressure to exchanges suspected of fake trading volume, with new tools.

The problem is widespread. According to a Bitwise Asset Management report presented to the Securities and Exchange Commission in March, nearly 95% of bitcoin trading volume is faked.

BitForex could represent a small slice of that fake volume.

In an interview, Chainalysis's Gradwell said exchanges gain popularity and users by ranking high in trading volume.

"If you're a new entrant to crypto, and you think you're going to a popular exchange - that actually has faked volume - it's not going to be a very liquid exchange. You're not going to get the best prices, or be able to buy or sell quickly."

A July exchange volume report by Alameda Research scored 48 crypto exchanges on a variety of criteria; BitForex failed five of the six tests.

Chainalysis examined 12 exchanges that were likely faking trading volume in 2018 - including Bithumb and Huobi.