Digital Currency Revolution Series: An empirical view on cryptocurrency trading volumes

Although the major crypto-pairs like bitcoin, ethereum, ripple, and other altcoins have considerably grown in the recent past, the entire cryptocurrency industry has been hindered by series of scams predominantly because of ‘data manipulation and number tampering’. 

We witnessed very recently that some exchanges/data providers were involved and assessed contemplating on several criteria intended to segregate authentic information.

Many exchanges likely engage in inflating the volume they report with a view of driving more interest towards their platforms and lure new clients.

Bitwise Asset Management, a cryptocurrency index fund located in San Francisco, CA, has released a popular series of reports detailing their view of the veracity of exchanges’ crypto trading volume. While they identify many of the same exchanges as this paper does whose volume appears fraudulent, their methods prove insufficient insofar as they discard, for instance, much Chinese volume which is legitimate. This paper uses additional methods and sources of data to paint a more complete picture of the worldwide cryptocurrency trading landscape.

As per the latest research report by Alameda, to reassess the authenticity, primarily, they have to manually explore the historical data of trading through their websites and observe if 10% of the data finds it to be equal to the data that was in the company’s records. If it wasn’t, the exchange was considered to fail the test. 

The second test looked into the fraction of prints which crossed the best bid and offer on the platform. Alameda stated that this metric leaves “significant room for error” and “exchange’s volume is likely legitimate according to this criterion if more than 50% of its trades occur at acceptable prices”.

Alameda concludes by stating that they intend to maintain a website with results like these updating daily for all the major crypto exchanges going forward. 

Currency Strength Index: FxWirePro's hourly BTC spot index is inching towards 98 levels (which is highly bullish), USD is at -25 (mildly bearish), while articulating (at 07:41 GMT). 

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex