Bitwise Asset Management, the creator of the world’s first privately offered cryptocurrency index fund, says that approximately 95% of the reported volume on CoinMarketCap is fake.
The company released a report which was presented to the U.S. Securities and Exchange Commission (SEC) on March 19. The subject of the meeting was the “proposed rule change to list and trade, pursuant to NYSE Arca Rule 8.201-E, shares of the Bitwise Bitcoin ETF Trust”.
“The vast majority of the reported volume is fake and/or non-economic wash trading,” claims Bitwise in its report. If one sums up the reported volume on CoinMarketCap, it adds up to roughly $6 billion a day.
Although the CoinMarketCap is widely cited, and the report shows samples of the major media outlets citing CoinMarketCap figures, the reported volume is fake. Thus, Bitwise wants to prove that the actual bitcoin trading market is much smaller than it is actually reported.
In the report, they look at the data from 81 exchanges that report more than a $1 million of bitcoin volume traded per day. In the report, Bitwise comes to the conclusion that the actual daily trading volume is $273 million, which is around 4.5% of the reported $6 billion a day on CoinMarketCap.
Tim Enneking, the managing director of Digital Capital Management, thinks there are a couple of reasons behind the alleged fake reported volume by exchanges.
“Other than simply wanting to make volume appear larger than it is for commercial reasons (the greater the volume, the easier it is to attract even more traders), three other factors may play into the motivations behind exaggerating volume: (1) the generalized decline in volume over the last 12 months or so, which makes appearing to be larger both more important and more difficult, (2) the growing volume on OTC platforms, which both exacerbates and accelerates the first problem, and (3) the seemingly endless proliferation of new exchanges, meaning that more players are fighting for larger pieces of a shrinking pie.”
In January, Bitwise Asset Management and NYSE Arca filled the 19b-4 rule change proposal which would pave the way for the launch of the first bitcoin ETF.