BitWise Asset Management is one of the latest firms to attempt a Bitcoin ETF proposal to the US SEC. Most of the firms who have previously tried to get a Bitcoin ETF have been denied on the grounds that Bitcoin is subject to too much market manipulation. As such, most of these applications have taken steps to prove that market manipulation on the Bitcoin network isn’t a major issue.
Bitwise, however, seems to be taking a different approach. Rather than outright denying that market manipulation is a problem, Bitwise acknowledged it directly in a report that was presented to the SEC. However, the company seemed to say that the manipulation that happens in the Bitcoin space happens in the reporting of figures rather than in the figures themselves.
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Data on CoinMarketCap is Largely Fake
“The real market for bitcoin is significantly smaller, more orderly, and more regulated than commonly understood,” the report reads. “95% of Bitcoin trading volume is fake and/or non-economic in nature.”
Why is this misinformation about Bitcoin trading volume so widespread? According to the report, it’s all because of CoinMarketCap.com. Even the most prestigious and reputable news sources–including the New York Times and the Wall Street Journal–seem to take CMC’s trading volume data at face value.
9/ Fake exchange have volumes that have no such resemblance and don’t correspond with broader market.
More examples in the full analysis available on https://t.co/MQ4CD3K9hz pic.twitter.com/acZl8llAcP
— Bitwise (@BitwiseInvest) March 22, 2019
Secondly, reported volume figures are often distorted by exchanges seeking to raise their prestige: “the vast majority of this reported volume is fake and/or non-economic wash trading,” the report explained. Exchanges may be interested in reporting higher trading volumes in order to “attract listing fees (often millions of dollars) from ICOs and alt coins.”
BitWise explained that through its own extensive analysis of data collected on 81 cryptocurrency exchanges, only 10 had actual trading volume: Binance, BitFinex, Kraken, Bitstamp, Coinbase, bitFlyer, Gemini, itBit, Bittrex, and Poloniex.
It’s still unclear whether the data will cause the SEC to lean toward or away from allowing for the creation of a Bitcoin ETF.
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