>CoinBene is reported to be the largest bitcoin exchange in the world
I literally never heard of this exchange before today. If some random exchange popped up and overtakes all of long time "legitimate" incumbents (eg. coinbase, bitstamp, kraken) combined, I'd be suspicious of that too. The same applies for most of the other exchanges near the top of the list on slide 22. In reality, I don't think seasoned traders are affected by this, only newcomers and the occasional journalist.
I think it's pretty well known within the crypto community that CoinMarketCap exchange volumes are bullshit - other than Binance, the top 45 basically consist of exchanges I've never heard of. They're bullshit because there is a ranking, one that many newbies would refer to, and it's trivially easy to fake volumes through wash trading or just lying if you own an exchange. It's been like that for at least a couple years too - when I first found CoinMarketCap, the top exchange was BitMEX by a large margin, which everybody said to stay away with and doesn't even appear today.
BitMEX isn't a spot exchange. It offers derivatives and futures products. It does has its share of issues (namely system overload) but it is probably the only legitimate platform (i.e. no fake volume) on Coinmarketcap that doesn't get volume counted because it is not spot volume.
The elephant in the room is that the liquidity and trading on BitMEX is legit and many times higher than spot, yet BitMEX is unregulated. Big players can and has used BitMEX to manipulate spot prices (arbitrage/market maker bots will move the price on regulated spot exchanges accordingly). It used to be that most of the manipulation happens on Okcoin futures products. Since the China fiasco in 2016-2017 they lost almost of all of their traders to BitMEX.
Yup. CMC tries to account for this in its pricing (which is volume-weighted btw) by ignoring those exchanges (which it discloses in the "Markets" section).
The SEC has not been enthusiastic about Bitcoin ETFs. On another recent application (VanEck):
>Bitcoin ETF is “absolutely not” going to be approved by the SEC, says CSO of CoinShares
> The whole cryptocurrency market has been eagerly waiting for the approval of a Bitcoin ETF by the U.S. Securities and Exchanges Commission [SEC]. The reason the exchange-traded product is of much importance to the community is that it is considered as the gateway to drive the institutional investors into the space.
You can go to any crypto-trading forum (i.e. /r/bitcoinmarkets) circa 2012 and find that this was common knowledge. Everyone knew/knows that 'Chinese' volume was mostly fake because the exchanges made it easy to do so with low fees. Whether the exchange simply let this happen or actually deliberately created the fake volume was immaterial.
UTXOs remain the best way to track overall market use and movement. Through this, you can plainly see that the last year of market activity has been thin, just traders competing with each other. With one notable exception in Nov/Dec of 2018 causing the big dump. This was one of the most singular events in Bitcoin history, with old coins fueling a major drop in price.
UTXOs remain the best way to track overall market use and movement.
UXTOs can be mass produced in bulk from single users controlling and scripting multiple wallet addresses.
Looking at the Winter 2017 UXTO transaction logs, it's pretty clear a single entity was (can/is) coordinating upwards of 10%-50% of the volume, the clearest examples of this are throughout December of 2017.
What happens on exchanges doesn't have to be settled on the blockchain and higher exchange volume is not necessarily reflected in utxo volume.
That being said, it looks like the whole 2018 had more utxo activity than 2017, and things seem to get even more intense lately: https://utxo-stats.com
This is by far the best analysis of the Bitcoin market I have ever seen. Super interesting. As the Twitter thread mentions, this could actually be good news in the eyes of regulators as it means the Bitcoin price is likely controlled almost entirely by legitimate trading on legal and regulated exchanges rather than the fly-by-night places that are faking their volume.
Well, the study shows that there are legit exchanges, so there is some place for the usual market forces to apply (and indeed, the price of Bitcoin on these exchanges lies in a tight band, too small for arbitrage opportunities). That doesn’t mean the price of Bitcoin can’t be manipulated by pump & dump or other price manipulation schemes.
But still, the study (at least the highlights given in the twitter thread) looks solid and well-presented.
pump and dump can take place in small cap equities as well. it will never be impossible - the thing thats needed is the regulation / surveillance to do enforcement on those who perpetrate it
I expect the bitcoin case will remain dubious to the SEC because Bitcoin has no fundamentals. I.e no relationship to anything tangible.
Further, volume on unregulated exchanges does effect price on regulated ones ... so you don’t have to manipulate a regulated exchange to move price.
Really what crypto needs is a trustless blockchain based exchange. Something like an Ethereum based limit order book. Then no other exchange is relevant.
These already exist, eg. Idex and other distributed exchanges.
People use them - Idex is one of the most-used Ethereum dApps - but they suffer from ease-of-use problems. Either you go through a web interface (which defeats the purpose of them being decentralized, since you have to trust the website you're making the trades on) or you put up with the hassle of sending individual transactions to smart contracts with your Ethereum wallet, which is pretty error-prone for most ordinary users.
money is consensus and not backed by anything other than a government promise. bitcoin is backed by hash power = money. it's 2019 we are past tulip phase. you can pay taxes in usa with it.
What other analyses have you read? This was one of the worst "research" resources I read. Did they write off all exchanges that they identified to show abnormal trading patterns? Huobi and Bitmex are considered to trade $0 according to this research? This is a waste of everyone's time.
One villain here is CoinMarketCap, which obviously knows most of its listed exchanges are fake yet continue to show their reported volumes. I believe they are paid by fraudulent exchanges to do this. CMC's product is solid but its values are corrupt.
They do their best to remove fake volume as far as they can tell. And in my opinion it's best to list the exchanges and assets and let the users form their own conclusions than to be a centralized gatekeeper.
I work in this industry, and they do not do their best. The Blockchain Transparency Institute lists OKex as only 11% real volume[0] yet it is the 6th biggest exchange[1]. Repeat for many other exchanges. Simply put, they need to remove most of the exchanges.
If I have taken anything away from 2018, it's that people generally do not form their own conclusions. We need gatekeepers more than ever today because fraudulent data and information is so easily created.
When 95% of volume was studied to be fake, even if they were 50% off in their estimate there is an absolute need for Coin Market Cap to be a gate keeper.
Faking volume is an issue with exchanges, not Bitcoin. Exchanges are in the business of trading. They have incentives to transact Bitcoin. Bull market produces more volume. Bear market has less volume. I take this as most Bitcoin people now are HODLers. They actually see it as a Store of Value.
With this research, the Bitcoin ETF group is telling SEC: Our ETF will better than other exchanges. Please approve.
True, but when 88% of the large ($1M+) exchanges and 95% of transactions are mostly fake volume, that's reflective of Bitcoin as a whole, wouldn't you say?
If I may, let me apply your comment to something else:
50% of phone calls made each day in the US are fake robocalls, that’s reflective of the phone system as a whole, wouldn’t you say?
The fake volume may be reflective of bitcoin price or the lack of regulation of bitcoin exchanges but I don’t think thenfake volume is reflective of bitcoin as a whole.
Store of whats left of its value. If AAPL shares went down to $8 or gold hit $120/oz nobody would be yelling about how great a store of value they are. Bitcoin holds its value about as well as an egg salad sandwich in the hot summer.
Transactions in the last 24 hr were 10% of the market cap (i.e. ~$7b USD), so the on-chain activity is therefore much higher than what's being claimed as "real" volume here.
"When you remove fake volume, the real BTC volume is quite healthy given its mkt cap. Gold’s market cap is ~$7T with a spot volume of ~$37B implying a 0.53% daily turnover. Bitcoin’s $70B market cap would imply a 0.39% daily turnover, very much in-line with that of gold"
So people are using it as a store of value, rather than a medium of exchange? This would count against it being used just to buy drugs etc wouldn't it?
I think that's right. It's anecdotal but everyone I know who owns some BTC owns a small amount and sees it as a sort of (a) hedge against major turmoil in fiat and (b) possibly long-term upside if more and better uses for the tech materialize.
So it's digital gold, and maybe being digital means it has long-term upside.
It's true that Bitcoin doesn't have a lot of transaction volume, but this isn't where you'd see that. "Spot volume" (trading volume) is taking place on centralized exchanges -- not on the blockchain.
Traditionally bitcoin has been held to a new higher impossible standard than other asset classes, when put on the same level of them it functions similarly.
For example, when looked at as a currency it acts similarly. Where the small tiny faction of the asset (M0) is used as a medium of exchange where people buy consumer goods and services. With M1 M2 M3 and MB being illiquid parts of the supply used for investment into other assets or for stores of value.
> So people are using it as a store of value, rather than a medium of exchange?
Just like currencies and metal commodities, both, and in similar proportions.
Bitcoin is traded less than gold. Gold isn't really used to buy consumer goods, and tends to be used as a store of value, thus the low trading volume. So it doesn't seem as if bitcoin is being used to buy things.
I wasn't making any judgement on what Bitcoin is good or bad for. I'm just inferring from the data how it is actually being used.
Readit News
I literally never heard of this exchange before today. If some random exchange popped up and overtakes all of long time "legitimate" incumbents (eg. coinbase, bitstamp, kraken) combined, I'd be suspicious of that too. The same applies for most of the other exchanges near the top of the list on slide 22. In reality, I don't think seasoned traders are affected by this, only newcomers and the occasional journalist.
https://coinmarketcap.com/rankings/exchanges/
I think it's pretty well known within the crypto community that CoinMarketCap exchange volumes are bullshit - other than Binance, the top 45 basically consist of exchanges I've never heard of. They're bullshit because there is a ranking, one that many newbies would refer to, and it's trivially easy to fake volumes through wash trading or just lying if you own an exchange. It's been like that for at least a couple years too - when I first found CoinMarketCap, the top exchange was BitMEX by a large margin, which everybody said to stay away with and doesn't even appear today.
The elephant in the room is that the liquidity and trading on BitMEX is legit and many times higher than spot, yet BitMEX is unregulated. Big players can and has used BitMEX to manipulate spot prices (arbitrage/market maker bots will move the price on regulated spot exchanges accordingly). It used to be that most of the manipulation happens on Okcoin futures products. Since the China fiasco in 2016-2017 they lost almost of all of their traders to BitMEX.
My gut reaction is "this should be illegal"
Direct link to ETF research PDF linked from the thread:
https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2...
Interesting things to see in the hundreds of pages:
page 24: What Do Real Exchanges Look Like?
page 43: Trade Size Histograms For Suspect Exchanges
page 57: Applying All Three Analyses: BitForex
page 111: We Have Reached The Point Of Diminishing Returns For Improvements In Efficiency
>Bitcoin ETF is “absolutely not” going to be approved by the SEC, says CSO of CoinShares
> The whole cryptocurrency market has been eagerly waiting for the approval of a Bitcoin ETF by the U.S. Securities and Exchanges Commission [SEC]. The reason the exchange-traded product is of much importance to the community is that it is considered as the gateway to drive the institutional investors into the space.
>So far, the commission has rejected all the proposed rule changes with the main reason stated as concerns over market manipulation... https://ambcrypto.com/bitcoin-etf-is-absolutely-not-going-to...
There have been a bunch of applications, all turned down so far.
UTXOs remain the best way to track overall market use and movement. Through this, you can plainly see that the last year of market activity has been thin, just traders competing with each other. With one notable exception in Nov/Dec of 2018 causing the big dump. This was one of the most singular events in Bitcoin history, with old coins fueling a major drop in price.
Looking at the Winter 2017 UXTO transaction logs, it's pretty clear a single entity was (can/is) coordinating upwards of 10%-50% of the volume, the clearest examples of this are throughout December of 2017.
That being said, it looks like the whole 2018 had more utxo activity than 2017, and things seem to get even more intense lately: https://utxo-stats.com
But still, the study (at least the highlights given in the twitter thread) looks solid and well-presented.
Further, volume on unregulated exchanges does effect price on regulated ones ... so you don’t have to manipulate a regulated exchange to move price.
Really what crypto needs is a trustless blockchain based exchange. Something like an Ethereum based limit order book. Then no other exchange is relevant.
People use them - Idex is one of the most-used Ethereum dApps - but they suffer from ease-of-use problems. Either you go through a web interface (which defeats the purpose of them being decentralized, since you have to trust the website you're making the trades on) or you put up with the hassle of sending individual transactions to smart contracts with your Ethereum wallet, which is pretty error-prone for most ordinary users.
[0] https://www.blockchaintransparency.org/
[1] https://coinmarketcap.com/rankings/exchanges/
When 95% of volume was studied to be fake, even if they were 50% off in their estimate there is an absolute need for Coin Market Cap to be a gate keeper.
With this research, the Bitcoin ETF group is telling SEC: Our ETF will better than other exchanges. Please approve.
50% of phone calls made each day in the US are fake robocalls, that’s reflective of the phone system as a whole, wouldn’t you say?
The fake volume may be reflective of bitcoin price or the lack of regulation of bitcoin exchanges but I don’t think thenfake volume is reflective of bitcoin as a whole.
To me it shows that: 1) Anyone can start an exchange (unregulated market) 2) Some exchanges are shady and untrustworthy
It's not that "most transactions are fake volume". Its that if you aggregate the data, you include a lot of bad data.
Dead Comment
So people are using it as a store of value, rather than a medium of exchange? This would count against it being used just to buy drugs etc wouldn't it?
So it's digital gold, and maybe being digital means it has long-term upside.
Best use cash and leave no trace.
Dead Comment
I don't have any money to launder so I'm not an expert, but that's seems right?
For example, when looked at as a currency it acts similarly. Where the small tiny faction of the asset (M0) is used as a medium of exchange where people buy consumer goods and services. With M1 M2 M3 and MB being illiquid parts of the supply used for investment into other assets or for stores of value.
> So people are using it as a store of value, rather than a medium of exchange?
Just like currencies and metal commodities, both, and in similar proportions.
I wasn't making any judgement on what Bitcoin is good or bad for. I'm just inferring from the data how it is actually being used.
Dead Comment