When I first started investing in and trading crypto there was only Mt. Gox, Bitcoinica, and perhaps a handful of obscure sites with low volume.  Eventually, years later came Poloniex and several other giants, helping bring crypto trading more into the mainstream and giving birth to a new industry.  Since then, many exchanges have appeared along with the many new tokens.  Exchanges are a solution wrapped in a problem though, as obtaining a listing is either at a high cost for a top exchange, or easily done, but on a low volume exchange like IDEX or EtherDelta and Friends.

These listings typically come with minimum volume requirements or the listing will be lost.  This causes projects to employ methods that in traditional markets like stocks, are highly illegal.  Wash trading, as it is called involves simultaneously buying and selling between yourself, or through seemingly unrelated accounts that are run by the same person or entity.  This trading has no effect on the market as the price of each trade is controlled, with minimal or no profit or loss being made.  But the trading volume is increased, and the listing kept.

When you add up all of the projects doing this, along with the well-known fact that some exchanges are doing this themselves, you end up with massive amounts of the fake volume being reported to sites like CoinMarketCap.  This fake volume has a massive benefit to the exchanges themselves as these exchange listings are ranked by volume, placing those with the highest amount of daily volume for each token, at the top of the listing.  This leads to more people using the exchange and increasing the volume even more.

It is estimated that up to two-thirds of all trading volume may be fake.  A recent report by the Blockchain Transparency Institute lists the discrepancies, with some exchanges increasing their daily volume through wash trading by as much as 187,258x.  Yes, you read that right.  Nearly two-hundred thousand percent more volume then is there.  One of the most well-known thanks to the rising popularity of VeChain, LBank is faking as much as 4420x their volume by trading amongst themselves.

Among the top ten exchanges by adjusted volume.  Huobi and Okex still stand-out, increasing their volume by 12x and 19x respectively.

Bitforex is absent from this list but an excellent example of an exchange using this to their advantage.  They were a completely unknown exchange until they were suddenly visible in the number one position on CMC for several coins.

One of the main points I wanted to make by writing this article is that we are actually in much more of an infant market than we think.  With over 70% of the daily volume being faked, we are left with only a handful of true market volume.

This kind of activity presents the crypto market in a light that is not yet ready for mainstream, in fact, some larger exchanges like CoinBase have begun to prepare for the inevitable massive inflow of institutional money waiting on the sidelines.  Before this capital enters the market, they must be assured that wherever they are trading, the data and activity behind it, are true and subject to the same scrutiny that traditional markets are.

Coinbase even recently denied that they partake in such activities, although others have questioned if this is true.  According to a report titled the “Virtual Markets Integrity Initiative” put out by the State of New York Attorney General, Coinbase themselves disclosed that almost twenty percent of executed volume on its platform was attributable to its own trading.


This clearly shows that even the exchanges at the top are actively using their marketplaces to their full advantage.  While it is understandable from a business and trading perspective, it still raises plenty of questions, and more transparency is needed before we can progress as a whole.  At the moment the industry reminds me of the Cali Cartel in Season 3 of Narcos where they only had six months to make as much money as possible before everyone goes legit.  We all know regulation is slowly taking place and until everything is in effect, we can expect more of this wild-west activity to continue.

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