Crypto Exchanges Fake Bitcoin Trading Volumes, an Analysis

Bitwise Bitcoin Fake Trading Volume

A recent article was published by Bitwise Asset Management reporting that “95% of Bitcoin volume on exchanges is fake”. At first glance this sounds horribly terrible. But if you look closer you can see that for all the major exchanges, this is simply not true. 

The report that was published by Bitwise Asset Management only investigated exchanges with claims of daily Bitcoin volumes > $1 million/day. 

The only exchanges with apparent real trading volumes are:

  • Binance
  • Bitfinex
  • Kraken
  • Bitstamp
  • Coinbase
  • Bitflyer
  • Gemini
  • itBit
  • Bittrex
  • Poloniex (owned by Circle)

Of note: passed Bitwise’s test, but reported volumes < $1million/day. 

Those exchanges are very popular and have high (reported) total volume, accounting for approximately $1,650,000,000 ($1.65 Billion) of daily volume, including all cryptos, and not only Bitcoin. However, when accounting for only Bitcoin, these exchanges total approximately $270 million (~0.39%) daily volume (for Bitcoin only), which is comparable to that of the daily trading volume for gold (0.53% daily volume) – which would be totally normal. 

If Bitcoin did trade ~$6 billion in daily volume, as is the total of reported claimed Bitcoin trading volume of the top 81 exchange, with a $70 billion market cap, that would be 8.5%, which is excessively high, unsustainable and not realistic for a market of a store of value. Whereas, 0.39% is much closer to that of the daily trading volume of gold. Which makes sense since Bitcoin is deemed a store of wealth, much like that of gold. 

Of the ten exchanges mentioned to be genuine, nine are regulated as MSB (Money Services Businesses) in the USA, and half also have BitLicenses (for NY State). Half have both (bitFlyer, Coinbase Pro, Gemini, itBit and Poloniex). The only one without any (US) regulatory credentials is Binance. But Binance seems thus far to be an honest crypto company with a legendary reputation that will likely follow regulations once laid out more clearly.

I am not worried about Binance. 

Moreover, half of the top ten have implemented market surveillance technology (Nasdaq SMARTS, Irisium Market Surveillance, NICE Actimize and Coinbase’s customized internal surveillance). 

Honest crypto exchanges, with diligently working teams that are hired not only for their skills and knowledge, but also for their integrity are the exchanges that you should want to give your crypto trading business too. The honest crypto exchanges that do not fake volume are the ones who are in it for the long term and not here to make quick riches by faking volume. 

Furthermore, this report identifies legitimate exchanges with real trading volume and those exchanges that are taking real measures to protect traders and allow for the free market to operate. 

Of note is that the exchanges that are not faking volume are also the ones who are regulated Money Service Businesses and half of whom are implementing market surveillance. 

This is critical to moving forward in the crypto industry. We need to know which exchanges are legitimate and can be trusted. We also need to know which exchanges cannot be trusted. 

If an exchange is faking volume, then I do not want to use it.


End of story.

I treat this as being disingenuous, and therefore the same as I would treat a disingenuous person. If someone lies to me (directly or by omission or deception) then I do not know what else I can trust from said person. So, therefore, once an exchange participates in fake volume generation, I do not know if I can trust their security, their ability to process withdrawals or their privacy with my identity. 

Moving forward, regulators can open discussions with the ten exchanges that are practicing legitimate trading, install market surveillance on all of them (currently only half have market surveillance technology), and create legitimate Bitcoin price tracking from that data. 

What seems like apparent “bad news” in that an alledged 95% of Bitcoin volume is being faked, the reality is that it is a blessing in disguise because we can now fix this problem and move forward. 

Why Would a Crypto Exchange Fake Bitcoin Volume?

Bitcoin is the original cryptocurrency. Bitcoin has the largest market capitalization. Bitcoin has the longest and most secure public blockchain. Bitcoin has never been hacked. Bitcoin is THE public, open, censorship-resistant, free, borderless, permissionless crypto (so far). I’m no maximalist, just stating what the market is deciding for itself at the moment. 

Exchanges make money in many ways, but primarily through: (1) trading fees, and (2) listing fees, for crypto projects wanting to get on an exchange. 

One way that an exchange can attract traders is to advertise high Bitcoin volumes, since that indicates that they have a lot of traders, and suggests high liquidity (making it easier for someone to buy in or sell out of a position). Exchanges need to attract traders to earn income, so they fake their Bitcoin volumes to attract them. 

Additionally, exchanges can charge more for ICO listing fees (can range in the millions of dollars) or crypto project listings by claiming high Bitcoin volumes, since it indicates that they would be listing their coin on an exchange with high liquidity. 

When you do not have high Bitcoin volume it becomes tough to attract traders and to attract crypto coin projects such as ICOs for high listing fees. 

And those are the primary two reasons for a crypto exchange to fake volume. 

Decrypting the Data on Exchanges with Fake Volume – What are the signs of Fake Bitcoin Volume?

What are the indicators that an exchange is faking volume? There are a number of trends and signs to look for when an exchange is faking volume. 

  1. Value of the Bitcoin being traded – real people tend to use more rounded numbers. 
  2. Volume spikes with current events/news and market developments. Fake trading bots trade consistently 24/7. 
  3. Low Arbitrage between legit exchanges compared to price discrepancy between exchanges with fake volumes. 

Real people trade more rounded numbers and smaller amounts of Bitcoin. Bots used to fake volume will use much larger amounts of Bitcoin and are using odd fractions as opposed to relatively rounded numbers. Also, bots complete what is called “wash-trading”. This is when a bot puts in a sell order, for which there is an equal and opposite buy order, effectively cancelling out the trade, causing a little effect (but not zero effect) on the price. This causes volume to appear much larger than it actually is. 

Exchanges that fake volume have large volumes at various BTC amounts (including odd fractions). 
Legit exchanges who do not fake volume have more realistic human trading patterns. There are spikes of larger volumes at round numbers which humans are much more likely to trade. There is significantly smaller volume at fractionalized Bitcoin since humans do not typically think in small, odd fractions. 

Furthermore, humans have certain temporal trade patterns. People are not up 24/7 trading similar volumes throughout the whole time. Humans respond to market news and price movements, causing volume spikes at specific times. 

Trading bots on the other hand, being utilized to fake volume are trying to demonstrate consistently high Bitcoin volumes on the falsifying exchanges. This completely ignores the human psyche factors of spikes responding to certain news or events, and this is readily observable when you chart the trading volumes of these exchanges over time. See below. 

Volume spike alignment is similar across legit exchanges because people are reacting to the same market and the same news. When compared to illegitimate exchanges the volume remains uniformly high regardless of current events, a very inhuman way to trade, suggestive of fake Bitcoin wash-trading. 

Lastly, arbitrage is low between legit exchanges, they have low price deviations. They trade tightly. This means that real price discovery is efficient and accurate since if there is any deviation from the overall price consensus between exchanges, the deviant exchange quickly adjusts to the average price as traders rapidly capitalize on it. 

The tight price correlations are obvious here when all 10 line graphs are converged on the same trajectory. Tight trading means low arbitrage which means accurate/efficient price discovery. 

Markshire Crypto Conclusion on Fake Bitcoin Volume on Crypto Exchanges

While this news may come as a shock and may seem negative initially, it is definitely good that it was discovered, formally reported and the people and companies building and investing in the space are aware of it. 

I highly recommend everyone to steer clear of any crypto exchanges that have a negative history of faking Bitcoin volume. If they are faking Bitcoin volume it wouldn’t be a bad assumption that they may be faking other crypto volumes (i.e. Ethereum, XRP, Litecoin, etc).  I would suspect them to sacrifice other things such as privacy and security for their own gains, just as they sacrifice volumes and their reputation for monetary gain. 

What beneficial changes have occurred as a result of this report?

CoinMarketCap will alter exchange volume metrics. They do not appear to have made any changes as of yet, but they claim that they will. CoinMarketCap is extremely popular in the crypto industry for tracking crypto prices and exchanges volumes. However, they have been quite controversial in the past, and remain so today. Given the nascent industry it is tough to find accurate numbers to gauge prices and exchange volumes. 

Messari launched new “Real 10 Volumes” to track prices and volumes for its index of Bitcoin. Messari is a crypto research company. They announced they will only be using the above mentioned 10 exchanges based on their own research and confirmed by Bitwise Investments report as well. This consistency in findings is reassuring as well. 

With Messari’s launch of the “Real 10 Volumes” index for Bitcoin it provides much more accurate pricing and volume numbers for institutional investors and regulators/law makers to feel more comfortable with Bitcoin and cryptocurrency in general. 

Moreover, Bitwise Investments has launched a website to track the Bitcoin volumes of legit exchanges. The website is here – Bitcoin Trade Volume

What about smaller exchanges?

I’m personally curious to know about smaller exchanges that claim to be legitimate. In particular, some smaller Canadian exchanges since I am Canadian. 

I know that CoinSquare, NDAX and CoinField are Canadian exchanges, but they are not mentioned in the Bitwise summary on Twitter. 

Coinsquare has reported ~$7 million in total volume, likely meaning that Bitcoin trading volume on it is much less than $7 million. I highly doubt they are fabricating volume since why fabricate low volumes? 

I cannot currently find accurate numbers for NDAX and CoinField exchanges, but they appear to be low, and low volumes does not support fabricated volumes, which is reassuring. 

I personally use NDAX, despite their low Bitcoin volume. Sometimes it takes a while for a buy order to be matched for me. But they have excellent security, are a registered Money Service Business and have partnered with all Canadian Banks, credit unions and financial institutions. 

Anyway, I hope you enjoyed my summary of the fake reported volume report from Bitwise Investments! 

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Author: Markshire Crypto

Millennial cryptocurrency investor, researcher, and writer. Medical professional, avid reader, proud nerd, and intellectual. Founder of Markshire Crypto. Mark has been into cryptocurrency since 2017, following the industry daily and creating content.

6 thoughts on “Crypto Exchanges Fake Bitcoin Trading Volumes, an Analysis

  1. What a nice post you wrote! I really enjoyed reading it and I could not be silent about your post so I decided to leave my comment here and say Thank You! For sharing this quality post with others.
    Actually this is exactly the information that I was looking for about bitcoin market and when I landed to your website and read this post, it answered all my questions in details.
    So I’m happy that you decided to write about this topic and share it with people. It’s very useful and can definitely be used as a great source for real bitcoin market.
    I will come back to your website again for sure and I’m looking forward to reading your new posts.)


    1. Hello Ali, thank you for the positive feedback. I hope that the report published by Bitwise Asset Management serves to make the industry more transparent and to bring more accurate information to the cryptocurrency industry.

  2. It’s been fun watching how quickly bitcoin has increased in popularity and price. What have you heard about it staying active and not collapsing?

    1. Hi Eddie,

      Yes, it has been a fun roller coaster! I have heard lots of news about it staying active actually. That is the reason I started this website in December 2018, at Bitcoin’s lowest price all year. There are numerous cryptocurrency exchanges opening, including Bakkt which is backed by the New York Stock Exchange (NYSE). The international monetary fund is currently experimenting with their own made cryptocurrencies to learn more about them. Bitcoin is legal as either a “currency”, “commodity”, “intangible asset” or “property” in numerous countries (Canada, Japan, Australia, Argentina, Bulgaria, Croatia, Finland, France, Germany, Iceland, Norway, the Philippines, Slovenia, Sweden, Spain, and many more).

      In addition to being used as a means of exchange or investment, crypto technology allows us to transform the world of finance, changing the way we view digital ownership (think song artists, stocks, bonds, drivers’ licenses, insurance policies, etc). There are companies all over the world developing applications, uses and interfaces with cryptocurrency technology.

      It is a very exciting time!

  3. I have zero experience in trading, and I know crypto is very popular. It is good to know what you should be looking for when looking for a bitcoin exchange. Now I know how to analyze the trade size histograms when looking for fake Bitcoin Volume and avoid untrusted exchanges.

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