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Analysis & Opinion

Why BTI’s ‘Market Surveillance Report’ is biased

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BTI Report is biased

In its latest report , BTI found that exchanges have been reporting fake trading volumes. As per the report, most of the phony volume originates from wash trading.

By definition, wash trading is whereby investors, brokers (including exchanges), and traders conduct selling and buying activities that cancel each other. Mainly, these activities are meant to lure traders or investors by posting fraudulent trading activities, including volumes.

More than 99% manipulated

According to the report, 17 cryptocurrency exchanges among Coinmarketcap ’s top 25 exchanges to be more than 99 percent manipulated “with many greater than 99.5 percent fake volumes, including 35 of the top 50 adjusted volume rankings…Over 60% of all exchanges ranked on popular data sites have little to no volume and were found to be over 96% fake each.”

However, not all exchanges have these malpractices. Unfortunately, only a few virtual currency exchanges have been cleared by BTI to have real volume. These are Binance, Upbit, Bitfinex, Liquid, Gate.io, Kraken, Coinbase, and Bittrex.

Tactics used

Among the tactics used for wash trading include, but not limited to:

“Buying Twitter followers and likes, filling up fake order books, mirror wash trading the largest exchanges with real volume, and trying to disguise their wash trading using various bot settings not to affect the price.”

Unfortunately, BTI seems to be biased with its list of exchanges with ‘real volume.’ Notably, the same list of exchange passed by BTI conspicuously aligns with the list in the recent report released by Bitwise Asset Management.

One of the exchanges missing from golden list from both the BTI and Bitwise reports is HitBTC. In its response to Bitwise’ report, HitBTC noted:

“Different exchanges have different customer profile. HitBTC is among the first crypto exchanges to offer low-latency institutional grade (FIX) trading API. This is why the client profile of HitBTC differs from that of unmentioned but implied ‘reference exchanges’.”

It’s not a coincidence, its deliberate

Although the coincidence between the two report s may seem as confirming the fake volumes in the exchanges, that may not be the case. BTI may be supporting the report by Bitwise.

Two exchanges in the two reports stand out; Binance and Bitfinex . The two exchanges don’t have a solid relationship with banks compared to other exchanges in the reports and which are not in the golden list. Additionally, there is very little information on who runs the Blockchain Transparency Institute (BTI). BTI’s website has no information on its members; just numbers.

Moreover, BTI lists on its website that it has shifted from “being a Non-Profit entity to a For-Profit” entity. While that statement by itself is not cause for alarm, the problem comes when BTI lists Bitwise Investments as one of its “investor class supporters.”

BTI and Bitwise have a running relationship

Interestingly, Bitwise, in its report, does not disclose that it has a running relationship with Blockchain Transparency Institute (BTI). Likewise, in BTI’s report, there’s no mention of Bitwise at the capacity of a supporter. Without such disclosures, BTI’s report is likely to be biased as it seeks to support the report by Bitwise.

Additionally, the report by Bitwise targeted the United States Securities and Exchange Commission in regards to a pending ETF approval. This, while it’s good to be objective, may have some element of persuasion. Also, the ETF by Bitwise is supposed to draw its index from a large number of virtual currency exchanges.

According to Bitwise, these exchanges have “the majority of currently verifiable Bitcoin trading.” i.e., exchanges without signs of wash trading. BTI’s report, which is a replica of the Bitwise report, seems like another step towards ‘cleaning’ the exchanges that Bitwise will draw its ETF index from. This implies that no independent research by BTI and or Bitwise was done.

Ashton Felix is currently a contributing writer for multiple crypto news sites. He got his big break when he mined his first bitcoin back in 2012. He enjoys learning about new technology and travels throughout Asia in his spare time. Ashton immediately fell in love with the culture and people of China. He is currently based out of Shenzhen and is fluent in Mandarin.

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