[Exclusive] Exchanges And Project Team Contribute To Faked Transaction Volumes


Jun 25, 2019

摘要: The two main participants for faking volumes are exchanges and projection teams. Exchanges are doing it for increasing their exchanges ranking, while the projection teams were trying to manage the market value.

On May 14, 2019, with the price of Bitcoin returning to $8,000 nearly after one year, the 24-hour trading volume of Bitcoin reached $34.9 billion. While, the Shanghai Stock Exchange Index traded only $29 billion on that day.

While such overwhelming transaction volume seems to be manipulated.

Define Faked Volume

Mayan Capital, a Israel based big data and artificial intelligence platform, reported that 60% of exchanges had misreported their trading volume 不要艾特least 20 percent.

In March, Bitwise reported to the SEC that 95% of transactions in the encrypted money market are fake. A report published last week by the Blockchain Transparency Institute (BTI) was even more shocking- 17 of the top 25 exchanges in CoinMarketCap faked 99% or even 99.5% of their total transactions. It notes that more than 10%, 50% and 90% of the total transaction volume at Binance, Huobi and OKEx are faked. As for Bitcoin, among the largest 40 exchanges, more than 65% of the transactions are faked.

Faked volume can be achieved by selling and buying at the same time. This is explicitly prohibited by laws and regulations in the financial industry in various countries.

Why Fake Volume?

The purpose of faking volume is to create the illusion of large demands.

The in-charge of an exchange told ChainDD that two main participants for faking volumes are exchanges and projection teams. Exchanges are doing it for increasing their exchanges ranking, while the projection teams were trying to manage the market value.

Higher Exchange Rankings

The ranking setting algorithm relies heavily on the exchanges' transaction volume.

Rankings of exchanges will determine transaction and listing fees exchanges charged, which gives exchanges incentives to manipulate.

A higher ranking is also valuable for two main participants, which are users and projection teams. From the users' perspective, the higher ranking of exchanges means safer, more secure and better user experience. For the project teams, the higher ranking of exchanges means better exposure opportunities, which is important in managing its market cap.

Market value management

For the project side, they tend to boost volume as a way of "market value management". Market value management is a unique management concept of somewhat Chinese characteristics.

In 2014, the State Council promulgated the new "Nine Articles of the State Council", which put forward "Encouraging listed companies to establish market value management system".

As a "characteristic product", market value management is often confused with market manipulation in traditional financial markets. Mr.Jiang, the CFO at a Chinese traditional finance company told ChainDD the market value management can be seen as an extension of value management, aiming at matching the company's stock price with its intrinsic value. However, due to no previous successful examples and the lack of understanding of the mechanism, it is easy to cross the regulatory red line by simply manipulating stock prices.

In the barbaric crypto field, market value management is not different from manipulating the market. Investors "Guanhai" explained that the project team and its market value management team would step in at a certain price, through many rounds of high-frequency self-buying and self-selling in small trading volume, creating an illusion of sustainable price growth. Eventually, the growth will end at some point, a large volume of project tokens will be sold and later investor will incur in a deep loss.

Lack of regulation is the main reason

Wash trade has been banned in the Securities Exchange Act of 1934. The same practice is also banned in China and many other places in the world.

While in crypto trading, no such regulation exists.

And overwhelmingly high return (6700% if holding bitcoin from 2013) from crypto trading seems to encourage speculative traders.





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