Study Finds Most Bitcoin Trading Is Faked And Manipulated On Unregulated Exchanges

The Bitcoin boom has generally gone bust, and as a result, we just don't hear as much about cryptocurrency as a major market mover as we used to. The value of Bitcoin and other cryptocurrencies crashed last summer, leaving many investors hurting and lots of crypto mining rigs with expensive GPUs running idle and unused. The good news for gamers is that the crash of crypto meant graphics cards were finally available at reasonable prices. Further, a new report has been published today that throws more shade on the legitimacy of Bitcoin trading as a currency itself.

The analysis was published by Bitwise this week and found that unregulated currency exchanges actually fake 95% of Bitcoin trading. Regulators warn that unregulated cryptocurrency markets are ripe for manipulation. Bitwise is an asset manager that is trying to list the very first Bitcoin exchange fund.

Bitwise offered the report to the Security and Exchange Commission (SEC) on Tuesday of this week as it met with the SEC to talk about its application. The report was compiled to help regulators decide on the topic. Bitwise's global head of research, Matthew Hougan, says that the market appeared to be such a mess because people were looking at manipulated data. He maintains that if the nonsense numbers are tossed out, that Bitcoin should be an efficient and well-arbitraged market.

Bitwise's analysis found that "substantially all of the volume" reported on 71 out of 81 of the available Bitcoin exchanges is "wash trading." Wash trading is a term that describes the same person buying and selling Bitcoin at the same time; essentially the trading is fake. Wash trading has been rumored in the Bitcoin market for a long time, and Hougan says that Bitwise is the first to look at which exchanges are delivering real volume.

The 71 exchanges report an aggregate of $6 billion in average daily Bitcoin trading, but the study found that only $273 million of that figure was real trading. Hougan says that the exchanges have reason to want to fake volume. Higher volume from this manipulators makes them look more appealing to those wanting to make new initial coin offerings (ICO) and are looking for exchanges with the highest trading volume. Fees on an ICO can run between $1 million and $3 million per listing.

The SEC continues to caution investors that since most cryptocurrency trading platforms don't have the same monitoring capabilities and tools as traditional stock exchanges, the real actual value of Bitcoin can be skewed wildly.