Study Finds $3B Worth of Faked Cryptocurrency Volumes and Wash Trades

On March 10 a cryptocurrency trader and researcher published a report on how he believes $3 billion worth of cryptocurrency trade volumes, primarily from a couple of exchanges, are concocted. The author of the study, Sylvain Ribes, alleges that the exchange Okcoin has been fabricating up to 93 percent of its trade volumes.

Massive Discrepancies Between Exchanges

Sylvain Ribes has published a study that reveals some interesting information about trade volumes stemming from exchanges like Okcoin (Okex) and Huobi, which may be falsifying their trade volumes. Ribes calculated his data from order books across all major exchanges to “measure how badly market selling $50k USD worth of each cryptocurrency would crash the price.”

Further Ribes refers to a term called “slippage,” which he defines as “the percentage change between the observed mid-spread price and the lowest price I had to consent to sell the asset.” Throughout Ribes’ research of various currency volumes coming from exchanges like GDAX, Bitfinex, Kraken, Binance and more he found vast inconsistencies between trading platforms.  

“I found ridiculously massive discrepancies between exchanges. Not the kind that can be easily hand-waved away (“oh well, their users must behave differently”), but the kind that can only be explained by some figures being overstated as much as 95%,” explains Ribes’ study.

Leading the pack is Okex, currently ranked #1 exchange by volume with $1.7b total volume on both Coinmarketcap and Livecoinwatch websites.

Orange, dark blue and light blue dots are GDAX, Bitfinex, and Kraken. Red dots are Okex. The exchange “Okex is a ghost town” says Ribes.  
‘A Suffocating Majority of Okex Volume Is Fake’

Okex volumes raised a red flag for Ribes who says because the markets are unregulated artificial volumes and wash trading should be expected. Ribes’ slippage and volume chart shows the pairs with a daily volume of $100K across four exchanges over 24 hours.   

“Many pairs, albeit boasting up to $5 million volumes, would cost you more than 10% in slippage, should you want to liquidate a mere $50k in assets — Those pairs included, at the time of the data parsing (06/03/18): NEO/BTC, IOTA/USD, QTUM/USD — Hardly illiquid or low-profile assets,” Ribes states.

Although those numbers alone prove to me without the shadow of a doubt that a suffocating majority of Okex volume is fake, I had not witnessed first-hand how they implemented it — I thus logged into their platform and had a look at some pairs trading history. And indeed, they fake their volume in a laughingly obvious and artificial way.  

Ribes says that Okex volumes are very different than an exchange like Poloniex that is “generally quite liquid across all pairs.” The trader believes it’s quite “obvious” that Okex volumes are doctored. Further, the paper suggests that the trading platform Huobi Pro has roughly 81.8 percent of “made-up volume.” He details that even though there appears to be more organic volumes taking place “there still exists a strong background of constant low-key wash trading.” The study also looked at exchanges like Bittrex, Hitbtc, and Binance against “respectable” exchanges.

Study Finds $3B Worth of Faked Cryptocurrency Volumes and Wash TradesOkex data, and estimated percentage of fake volumes from Ribe’s study.
Binance CEO Calls Ribes Study a “Good In-Depth Analysis”

Hitbtc is a touch less liquid and small differences can be seen for various reasons. Ribes says the results stemming from Binance were more “intriguing,” but notes that the exchange has a “pretty restrictive policy when it comes to API-trading.”  

“Inspecting their volume history does not show any obvious suspicious activity,” explains Ribes.

After the report was published, Zhao Changpeng, the CEO of Binance said Ribes study was a “good in-depth analysis.”

We like liquidity, but we don’t like “flash” liquidity, which are used by many HFT “market makers” — Binance believes having these restrictions help the much larger number of retail traders.

Additionally, Ribes has asked Okcoin and Huobi Pro over Twitter if they would like to provide a statement concerning his recent study on phony trade volumes. “I’m happy to quote you on a comment if you’d like to provide one,” the trader states. This is also not the first time these exchanges have been questioned about falsified trade volumes.

What do you think about the study Sylvain Ribes conducted? Do you think his conclusion is correct that some exchanges are faking their volumes? Let us know in the comments below.

Images via Shutterstock, and Sylvain Ribes report. 

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11.03.2018 / 23:05 115
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