Wash Trading: Ten Major Exchanges Vouched for Only 7% of Bitcoin’s 24-Hour Volume

By Jack Filiba

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On June 4, 2019, Bitcoin’s global 24-hour trading volume across all exchanges was around $23 billion USD, according to sites like CoinMarketCap. This figure may be greatly overestimated, however, due to the fact that many exchanges are faking their volume.

While there is not yet a clear way to scrutinize all exchanges, focusing instead on ten of the largest spot traders with proven activity puts Bitcoin’s 24-hour volume closer to $1.5 billion USD, according to Messari.io This difference in volume could potentially be as high as 93%, and other top-100 cryptocurrencies may be being manipulated on a similar scale.

“Inflated trading volume can mislead people to think that an asset is healthier than it actually is”

In the cryptocurrency landscape, a new metric referred to as “Real 10” is emerging as a way of gauging how much trading activity occurs on any given day. The metric considers volume from ten large and seemingly legitimate spot trading exchanges in order to present a ballpark estimate of an asset’s 24-hour transaction volume.

Many cryptocurrency exchanges are suspected of inflating their volume through practices such as wash trading. These practices can create a manipulated view of the industry. There is a clear need for new ways to interpret the landscape since misleading information is antithetical to cryptocurrencies like Bitcoin — which are meant to be open and transparent by nature. Misleading information is especially problematic when it comes to important metrics like trading volume.

“Trading volume is an important measure of liquidity, and liquidity is particularly important for monetary assets such as Bitcoin,” Messari’s Head of Product, Qiao Wang, told LongHash. “Generally speaking, the higher the liquidity, the healthier the monetary asset.”

“Inflated trading volume can mislead people to think that an asset is healthier than it actually is. Furthermore, exchanges are incentivized to report inflated volumes in order to attract traders.”

Of course, the “Real 10” metric is not without its own set of flaws. While Bitcoin experienced a 93% gap between the 24-hour volume supposedly occuring on the market as a whole and the daily volume occuring on ten proven exchanges, these exchanges are unable to paint a full picture of the industry on their own. The metric only considers Binance, Kraken, Bitfinex, Coinbase, Bitstamp, BitFlyer, Gemini, itBit, Bittrex, and Poloniex. Note: this is not an endorsement of these exchanges, but rather the result of research carried out by Bitwise.

“These are exchanges that we strongly believe are free of wash trading activities, but that does not necessarily mean that the volume reported by other exchanges is 100% wash trades,” said Wang. “As such, the ‘Real 10’ exchange volume underestimates the real global volume, perhaps by a factor of two or so.”

Other leading assets may have a higher percentage of inflated volume

Due to its popularity, Bitcoin is the currency that experiences the largest total inflated volume each day. The percentage difference between the global 24-hour trading volume and “Real 10” volume exhibited by other assets, however, is even more severe in many cases.


As our chart shows, other leading assets like Dash (98%), Ethereum (96%), Stellar (95%), Litecoin (95%), and EOS (94%) had a larger percentile difference between what was reported across all exchanges on June 4 and what was reported by the ten exchanges that the metric considers.

Several other leading assets had a slightly smaller percentile difference than Bitcoin, such as Bitcoin Cash, TRON, Monero, and XRP. These assets all had a difference of more than 85%.

When using this metric to consider such a broad spectrum of digital assets, more immediate challenges occur. For instance, some currencies may be primarily traded outside of the ten exchanges considered by this metric. Since there are likely numerous other exchanges not engaging in significant levels of wash trading, these assets may be less inflated than they appear.

In addition, Messari’s methodology when it comes to “Real 10” 24-hour volume only includes spot exchanges, so it misses out on some large derivative exchanges such as Bitmex.

However, as Wang puts it: “The reported global [cryptocurrency exchange] volume is at least an order of magnitude larger than the real global volume.”

Ultimately, the method that most exchanges use to handle transactions makes it extremely difficult to get accurate readings of assets that are supposed to be transparent.

“While on-chain transactions are publicly auditable, exchange trading generally happens off-chain — in the proprietary databases that exchanges maintain,” Wang explained. “Therefore, it’s up to exchanges to report trading volume truthfully.”

Unfortunately, until a wider array of trading platforms act transparently when reporting their volume, the only way to get a realistic understanding of the industry may be to exclude the majority of exchanges.

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