The world of cryptocurrencies has many secrets, despite its young age. However, as this technology promotes transparency, many of those secrets are slowly being discovered. One such secret includes the sudden rise of crypto exchanges, many of which were next to unknown only a few, short months ago.
Crypto Exchanges Reporting Fake Volumes
Today, exchanges like BitForex, which is a perfect example of this sudden growth, are among the largest platforms around. Their daily volume can be counted in billions of dollars, which makes them almost a match for traditional stock exchanges, some of which are around for over two centuries.
In an attempt to uncover how this happened so suddenly, Bloomberg did thorough research and reported its findings here. As for the market participants, most stated they suspect that the exchanges are either not doing enough to stop abuse on the platform, or that they might even be offering incentives to those who would artificially inflate the trading volumes. Whatever the case may be, BitForex is a red flag, since its reported volume is the largest one among all the platforms tracked by CoinMarketCap.
The problem with fake volume reports is that they provide a false image of the exchange and the market. Individual investors, especially new ones, can be tricked into making wrong business moves. At the same time, a situation like that discourages institutional investors from entering the crypto market.
While these practices are not specifically illegal, they are still considered manipulative and dishonest. But, as the former crypto exchange executive, Neil Woodfine, stated, “Some exchanges will say ‘everyone’s doing it, so I’m doing it.”
Trust in Crypto Exchanges Drops
As mentioned previously, a lot of exchanges are quick to offer rewards to their users who would exploit some methods to make a profit. At the same time, they are making the exchange’s trading volume bigger. This includes methods such as trade mining, or transaction mining, which is one of the practices on BitForex.
The report also claims that BitForex is not the only one and that FCoin, CoinBene, DOBI Trade, and CoinSuper are also known for using such methods. Most of the exchanges are not properly regulated by the monetary authorities, which is why methods like this can still be exploited, seemingly with no consequences.
However, crypto experts from all around the world are aware of these methods, as well as which exchanges are using them. Needless to say, most of them are not supportive of such practices at all, since performing them damages the reputation of the entire industry.
Image from Shutterstock