The Problem with Artificially Inflated Bitcoin Exchanges


Bitcoin is always a hot field for investors and traders. It promises highly efficient trading with high possible returns. But regardless of you knowing how to short and long bitcoin or use other common strategies, that would probably fail because of some shady statistics. Many bitcoin exchanges are actually faking their statistical data or artificially inflating it to gain attractive numbers. 

If you’d fall on such tricks, you’d be placing investment on problematic schemes. That leads to losing your bitcoin or money in a snap. And you wouldn’t want that. 

Beware: Bitcoin Volume is often Artificially Inflated with Wash Trading 

An intensive study by Bitwise show that 95% of the bitcoin trading volume is artificially inflated. During a 4-day period in March of 2019, 71 for every 81 daily trades is bitcoin exchanges are not real. Meaning, only $273 million of the reported $6 billion worth of trade each day are authentic. 

This is done by most bitcoin exchanges to make their asset look larger in terms of daily volume. It helps in pushing their platform atop the listing, thereby attracting more users or investors. Moreover, because of such bitcoin exchanges boasting large worth of volume each day, they tend to claim higher listing fees from Initial Coin Offerings (ICOs). 

How do Bitcoin Exchanges Artificially Inflate Volume 

There are few methods for a bitcoin exchange to manipulate trading volume in foul ways…  One is to manipulate the algorithm in their system, so it would reflect for bitcoin traders and investors to see. But the most popular is the wash trading method, in which they sell and buy the same asset subsequently. 

So, imagine you’re selling and buying the same amount of bitcoin on the same or almost similar price. You lose nothing, yet you gain nothing as well. However, that still reflects on the blockchain and on the platform of a bitcoin exchange.  

The volume sold is different from the volume bought, even though that’s the same bitcoin in reality. That inevitably reflect the total trading volume for such specific day, hence boosting it easily. Practically deceiving investors to lure them on to a certain bitcoin exchange. Needless to say, you don’t want to engage with such kind of unreliable bitcoin exchanges. 

Find a Reliable Bitcoin Exchange 

With the high percentage of shady daily volumes from different bitcoin exchanges, you’re probably wondering how to pursue with BTC trading and investing. The key is to aim for the remaining 5% of the trading volume, which is supposedly the number of authentic trades. 

Bitwise has 10 suggested reliable exchanges which reportedly conduct legitimate trading. This includes Binance, Kraken, Coinbase and Gemini among other exchange platforms. Bitwise have reported these platform show around only $1 million worth of average bitcoin volume, but are legitimate. This means these bitcoin exchanges are more reliable than many others today. 

On a side note, some experts also say that although many exchanges implement wash trading, it doesn’t mean they don’t do legitimate trading at all. They simply can’t run with wash trading alone. Having said that, you should prioritize finding reliable trading where your own bitcoin transactions would be handled carefully. Whether an exchange is suggested by Bitwise or otherwise, be sure to do your research and background check to verify a platform’s reliability in terms of performance along with other trading factors. 

Yes, artificial inflation of bitcoin volume is truly problematic and scary. But when you do wise trading, you’d increase the safety and efficiency of your bitcoin today.