Chainalysis: Trading volume fraud has become a past tense, and large exchanges have been "renovated"

A new study by Chainalysis shows that large cryptocurrency exchanges seem to have stopped reporting false transactions in 2019. According to the New York-based blockchain analysis company, there are still some crypto exchanges, including Bitforex, that may give false trading volumes to counterfeit higher market activity and liquidity.


In this study, Chainalysis analyzed the top 10 cryptocurrency exchanges, the 10 exchanges Bitce 10 listed in the report. These exchanges are considered to be the only large exchanges that announce real trading volume – they are Binance, Bitfinex, Kraken, Bitstamp, Coinbase, BitFlyer, Gemini, itBit, Bittrex and Poloniex.

The company uses Bitwise 10 as a representative sample of large exchanges – all of which report real trading volumes and compare their data with data from other exchanges to identify potential suspicious activity.

Chainalysis found that between January 2018 and November 2019, Bitwise 10 collected an average transaction amount to the chain transaction ratio of 6:1.

Chainalysis further analyzes the other 25 exchanges with large trading volume. The company finalized another 12 exchanges, and their trading volume and chain trading volume ratio were significantly different from those of Bitwise 10 in 2018, but since then, their trading volume and chain trading volume ratio have begun to decline. And more in line with standard data. The 12 exchanges include Huobi, OKCoin, UPbit, Bithumb, Bit2c, Bitbank, Bitso, CoinCheck, Coinfloor, CoinOne, Korbit and Zaif.

Based on these data, Chainalysis concluded that the 12 exchanges are likely to falsify trading volume in 2018, especially between July and January 2019. Since 2019, the exchange volume ratios of these exchanges are closer to the ratio of Bitwise 10, indicating that they no longer misrepresent the volume of transactions.


(Bitcoin trading volume ratio on the chain, image source: Chainalysis)

Although most exchanges seem to no longer falsify trading volume, there are still some exchanges that have found suspicious activity. According to Chainalysis, between January 2019 and November 2019, the trading volume ratio was 40,000:1. This means that Bitforex gives the data that there is actually only one bitcoin entering the exchange for every 40,000 bitcoin exchanges, and Bitwise gives a trading ratio of 6:1.

According to Coin360, Bitforex ranked 36th as of press time.

Before Chainalysis announced the new study, Bitwise, a provider of cryptocurrency index funds, said in a report that up to 95% of transactions on non-compliant exchanges are inherently false or non-economic.

On November 12th, CoinMarketCap, a large cryptographic data provider, launched a new indicator to compare liquidity between exchanges and transactions to prevent exchanges from manipulating transactions.