Large Cryptocurrency Exchanges Lie About Their Trading Volume

cryptocurrency exchange

Sylvain Ribes, conducted a study which he posted on Medium. Following his research, the cryptocurrency trader determined that one of the largest cryptocurrency trading platform named OKEx inflated their volume by approximately 95%.

Volume Manipulation

The focus of his study was on the liquidity of cryptocurrencies and digital assets, which he determined by using the “slippage” method. Ribes chose a metric of $50,000 US to test the liquidity of the largest cryptocurrency exchanges. He used the 50,000$, selling it across many exchanges to see the effect it would have on the price.

Once Ribes had sold his $50,000, he looked at the liquidity of the exchange by measuring the rate of decline. He applied his “slippage” method on OKEx, Bitfinex, Kraken, and GDAX exchanges.

In March 2018, OKEx became the largest cryptocurrency exchange by volume, surpassing Binance. Currently, the four largest trading platforms by trade volume are OKEX, Binance, Huobi and Bitfinex.

Bitfinex, OKEx, and Huobi were created in Hong Kong and Kraken is based in San Francisco. Coinbase (also based in San Francisco), which has more than 20 million customers, is the creator of the GDAX exchange.

Cryptocurrency Exchange
Credits: Sylvian Ribes on Medium

According to the chart, the two cryptocurrency exchanges that the $50,000 sell off had the least impact on are Kraken and GDAX, which are mainly used as a fiat gateway (to buy or sell cryptocurrency). This means that the two cryptocurrency trading platforms have enough liquidity to fill increasingly large transactions.

In the four cryptocurrency exchanges studied, the one that had the highest rate of slippage was OKEx, which is apparently supposed to be the largest exchange in the world.

The sell off of $50,000 of a cryptocurrency on GDAX had a small effect on the volume with a rate of decline of 0.1 %, according to the previous chart.

However, the same sell off of a particular cryptocurrency on OKEx made the value of their cryptocurrency drop a lot more than GDAX, which made order books unbalanced.

Ribes stated in a blog post, that cryptocurrency-only exchanges such as OKEx are inflating and manipulating their volume, since small sell offs lead to massive slippages.

“The chart is striking. It shows how, although all first three exchanges seem to behave rather similarly, OKex pairs, in red, all have a massively higher slippage with regards to their volume. Like I explained before, this can only mean that most of the volume OKex claims is completely fabricated.”

He also added that even the largest cryptocurrencies such as IOTA and NEO prices could be affected a lot with a $50,000 sell-off.

“Many pairs, albeit boasting up to $5 mln volumes, would cost you more than 10 percent in slippage, should you want to liquidate a mere $50,000 in assets. Those pairs included, at the time of the data parsing (March 6, 2018): NEO/BTC, IOTA/USD, QTUM/USD. Hardly illiquid or low-profile assets.”

 

 

 

 

 

 

 

 

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