We’ve seen a recent trend of insights and reports discussing the fake volume present across crypto markets. The crypto community understands this is a major issue slowing its legitimate acceptance into general society, and many businesses and entities are making an effort to uncover the truth of the dubious crypto market economy.

Fake vs. Real Volume

Bitwise Asset Management recently published their report of “The Real Bitcoin Market”, which discusses in detail the rampant fake trading volume across exchanges, and tries to uncover true market size of Bitcoin. The link can be found here.

In the study, Bitwise acknowledges the challenge of acquiring real trade data from crypto exchanges. In order to filter through the “gray markets”, Bitwise selected data from primarily regulated markets for its detailed analysis of the true Bitcoin market size.

Data from the following exchanges were used to obtain to spot market volume: Binance, Bitfinex, Bittrex, BitFlyer, BitStamp, Coinbase Pro, Gemini, itBit, Kraken, Poloniex.

Bitwise noted that the Blockchain Transparency Institute has also investigated non-economic and/or fake volume at length, and has identified 56 exchanges it suspects of having fake volume. None of the suspected exchanges are among the ten exchanges that Bitwise used in its study.

Furthermore, all the exchanges listed above aside from Binance are registered as Money Service Businesses (MSBs) with FinCEN (Financial Crimes Enforcement Network) and are obligated to establish formal Anti-Money Laundering (AML) policies to identify and file reports for suspicious and illegal financial activity.

Based on spot market data collected from CoinMarketCap.com and Kaiko.com, Bitwise noted actual Bitcoin trading volume was significantly lower than exchange-reported volume.

Of the $6 Billion in Bitcoin spot trading volume reported by exchanges, Bitwise found only $270 Million to be actual true volume, which suggests that around 4.5% of reported Bitcoin trading volume is actually real. Or in other words, over 95% of reported Bitcoin volume is fake! That makes for quite the effective headline when it comes to scaring outsiders from venturing into crypto.

They further support these results by comparing daily market turnover with gold, a similar but different asset (store of value). We can observe that Bitcoin’s market behavior follows that of gold relatively closely. If we were to increase the daily turnover to match that of Gold, we would obtain a global Bitcoin daily spot volume of around $380 Million, which could serve as a rough estimate if we factored in fake volume exchanges.