Complex Made Simple

The majority of crypto trades are fake, and digital theft is rampant

A cryptocurrency trading data provider is now showing how much of a cryptocurrency’s trading volume can be trusted

17% of bitcoin (BTC) trading volumes, or $1.96 billion worth, are trustworthy 35% of Bitcoin trading is deemed as “fair” to “poor” (combined $3.99 billion worth) For ether (ETH), trustworthiness is even lower at 8%

In nature, many animals inflate their bodies to show themselves bigger when threatened by predators.

In life, it’s a typical strategy for any business to sometimes inflate their numbers, and show themselves bigger than they actually are.

Both are meant to eventually come out on top.

For animals, these actions are natural, purely born from survival instincts. For humans, the actions are faked and born out of greed.

A cryptocurrency trading data provider is now showing how much of a cryptocurrency’s trading volume can be trusted.

Nomics, a Coinbase-backed crypto data, analysis, and aggregate service, rolled out a new product dubbed as “Transparent Volume”.

It finds that around 17% of bitcoin (BTC) trading volumes, or $1.96 billion worth, are trustworthy, whereas 

For ether (ETH), trustworthiness is even lower at 8%.

Read: Bakkt Bitcoin futures testing could catapult the leading crypto to new heights, despite resistance


What does that mean?

Nomics measures the trustworthiness of a cryptocurrency’s trading volume, or the so-called transparent volume, by summing the token’s trading volumes across several exchanges. This transparent volume is then divided by the total reported trading volume to derive the transparent volume percentage for the token. 

Binance’s BNB outperform BTC and ETH in the percentage index because it is primarily traded on exchanges that are very transparent. 

Bitwise’s highly-cited report in March, states that 95% of the bitcoin trading volumes are fake.

Exchanges play a key role in the $300 billion coin-trading market’s growth by enabling investors to trade.  

Read: Your computer may be cryptojacked, and mined for cryptos! Here’s what to look for

Scandal alley

Back in April the Office of the New York Attorney General (OAG) accused Bitfinex of using the reserves of affiliated cryptocurrency Tether to cover up a loss of $850 million to payment processor Crypto Capital.  

Bitfinex and Tether are both owned by iFinix and if found guilty it could impact the wider crypto industry, some believing that removing Tether’s USDT stablecoin from cryptocurrency markets could lead to a severe liquidity crunch.

Companies like Russia-based Gotbit use bots to manipulate trading volumes to make a specific coin more recognisable on CoinMarketCap, the world leader in crypto data provision, according to WealthAdvisor.

Gotbit charges $15,000 to create the illusion of active markets by listing a token on smaller exchanges in order to create enough volume to become listed on the market data site.

Crypto exchange industry credibility

The Cambridge Centre for Alternative Finance’s 2nd Global Cryptoasset Benchmarking Study said IT security was the major risk factor for all crypto-asset actors. It reported that a total of $1.5 billion had been lost due to 58 identified breaches since 2011, with large exchanges particularly targeted.

According to a report by CipherTrace, since January $4.26 billion in total has been stolen from cryptocurrency exchanges, investors and users.

Japanese cryptocurrency exchange BITpoint lost a grand total of $28 million in July this year.

Binance, one of the world's largest cryptocurrency exchanges, had bitcoin worth $40 million stolen in May.

According to CipherTrace, two brothers from Israel were arrested on June 21 for an alleged phishing scam that lasted for three years during which the Gigi brothers, Eli, 31, and Assaf, 21, are alleged to have stolen over $100 million in cryptocurrency.

Six people who were suspected of a bitcoin scam worth $27 million were arrested in June, according to a Europol press release.

The theft affected over 4,000 victims, who were spread out in 12 different countries.