A new report released by the Blockchain Transparency Institute (BTI) was just released and the results are quite interesting. Released in December 2018, the report claims that for the top 130 crypto exchanges on CoinMarketCap (CMC), over 67% of daily volume can be attributed to wash trading. Wash trading comes in many forms, but this latest report points to the exchanges themselves as the primary culprits. BTI alleges over $6 billion in exchange volume is being wash traded every day. BTI went on to claim that “Over 70% of the CMC top 100 is likely engaging in wash trading by at least 3x their stated volume.”

Let’s not assume everybody is participating however. The report established a base set of exchanges like Binance, Coinbase, and a few others. They were chosen because of their comparatively legitimate data based on volume per user claimed and unique user traffic. Two of the companies that shot up the list for exchanges by volume due to their legitimacy included Kucoin and Cryptopia. Both of these exchanges reported under 1% volume to visitor ratio.

Outside of the largest exchanges, a low volume to visitor ratio means that their reported volume is likely accurate and not wash traded. This is because a large ratio means that, on average, each visitor is accounting for a large $ amount of trading volume. Doing the math for some of the shady exchanges, you find that their numbers imply that, on average, users are generating over $70-200k worth of trading volume daily… extremely improbable and most likely faked.

Cryptocurrency exchanges adjusted volume after removing wash trading

List from BTI showing claimed volume versus adjusted volume. Ordered by adjusted volume.

The biggest culprits in the Top 10 are ZB exchange and Lbank. ZB exchange appears to be wash trading volume at a rate well over 390x the actual volume. Lbank takes the cake with over 4400x the actual exchange volume.

The motivation for wash trading is simple: more volume -> coins seem more valuable -> people buy more of those coins. But who stands to gain more isn’t always so clear. The December report found that up to 90% of customer referrals to new exchanges came from coin rankings pages. A staggering 83% came from CMC alone. But CMC isn’t the only company to benefit, directly or indirectly, from the wash trading.

Some of the smaller exchanges are reportedly charging listing fees of $50,000. Others are charging between $350-$500k with the largest exchanges charging in excess of $1M. Along with the high listing fees comes demand for maintaining a certain level of volume. If a newly listed cryptocurrency does not maintain the expected volume, teams are penalized with additional fees. It’s easy to see how wash trading can get out of hand when the companies behind many of these cryptocurrencies have every incentive to generate high volumes on exchanges through any means necessary.

This new data reveals a stark reality for the cryptocurrency market as whole. A reality many may have already felt, but never had the data to prove it. If the majority of exchange volume is false, then so are the prices. In fact this report revealed that liquidating a mere $50,000 in crypto would crash the price of an asset such as IOTA, NEO, or QTUM by more than 10%.  In March during the original time of reporting, some of these cryptocurrencies had multi billion dollar values on CMC. Incredibly a mere $50,000 market sale on one of these wash-trading exchanges could drop the total market capitalization of NEO by more than $900M. A market effect of more than 18,000x! When one takes into account how cryptocurrency prices seem to move in concert with one another, the overall effect starts to sound very much like the Butterfly Effect.  

It is clear to see how wash trading can allow bad actors to artificially inflate the value of cryptocurrencies. In this largely unregulated world, investors must take all of this information in mind and act accordingly to protect their investments.


This article was written to the best of our knowledge with the information available to us. We do not guarantee that every bit of information is completely accurate or up-to-date. Please use this information as a complement to your own research. Nothing we write in any of our articles is intended as investment advice nor as an endorsement to buy/sell/hold anything. Cryptocurrency investments are inherently risky so you should never invest more than you can afford to lose.


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