Fake Volume Reports Lead to Broader Clarifications


It reads kind of like a grade school story of one classmate tattling on the another to the teacher, which in this case would be the U.S. Securities and Exchange Commission and other regulators.

We are awash in news today that after Bitwise Asset Management and other sources reported fake volumes on crypto exchange report sites, everyone’s looking at how this happened and what’s going to be done to fix it.

A person looking casually at this story from the outside, without extensive prior interest in the cryptocurrency community, would assume that these are exchanges pumping up volume numbers to try to entice investors.

That’s not necessarily the case.

One of the biggest culprits cited in breaking reports is CoinMarketCap– which is basically a report listing site for cryptocurrencies.

In news today, Cointelegraph’s Ana Berman reports that Binance CEO Chang Ping Zhao talked to the publication this morning and applauded various parties for creating the fake volume reports, which he said will make the industry more transparent.

Zhao downplayed blame regarding CoinMarketCap blame and suggested it’s better to work with reporting parties to resolve the issue than just to point fingers over the Internet.

This more mature path to clarification and eliminating ambiguity is something that many investors are hoping for as they wonder what the SEC will make of news that many reported user transactions are simply fraudulent.

As for CoinMarketCap, the most fundamental research sources explaining the origin and leadership of the website are not very forthcoming – (i.e. CoinMarketCap’s own web site and its Wikipedia page.)

However, if you go back to articles like this interview with CoinMarketCap VC of Marketing Carylyne Chan at The Cryptonomist, you can get some feel for how CoinMarketCap developed and some of the philosophy behind its crypto currency reporting. Interviewer Amelia Tomasicchio even touches on volume reports.

More recently, Chan has waded into this morning’s furor to agree that concerns over fake volume reports are “valid.”

But the issue is really bigger than one exchange or listing site – the question is: what does fake volume do to markets?

Another report from Tie provides a technical picture of why officials and experts consider some of this trading volume to be “potentially suspicious trading activity.”

It’s important to have transparency in trading. Fake trade volumes are an obvious concern to everyone. If you’re invested in cryptocurrency or looking to get there, keep an eye on how regulators and others are addressing these very central issues. Do the research to determine who’s behind a particular website or company and who stands to gain from changes in cryptocurrency volumes or other related factors. It’s a complex market, but it’s not one that totally defies definition. It’s just that sometimes this seems to be a collaborative effort.