INSUBCONTINENT EXCLUSIVE:
By Camila Russo and Benjamin RobertsonFour months ago, BitForex was just one of many obscure exchanges offering users the ability to
trade cryptocurrencies like Bitcoin.
Today, the Singapore-based platform is regularly reporting daily transactions that exceed $5 billion --
despite tumbling digital-asset prices and slowing activity on more established venues
Many market participants say they suspect these
fast-growing exchanges are either offering incentives that encourage users to inflate volumes, or not doing enough to stop abuse on their
One red flag at BitForex: Its reported volume is by far the biggest among 219 platforms tracked by CoinMarketCap.com, despite traffic on its
website amounts to a tiny fraction of most peers.
For individual investors lured to exchanges with inflated volumes, the risk is that
cashing out at prevailing market rates may prove much harder than the reported figures suggest
Doubts about the integrity of crypto markets have deterred some professional money managers from investing in virtual currencies and
emailed response to questions.
Transaction mining, also known as trade mining, is a controversial practice
On BitForex, users earn the equivalent of $1.20 in digital tokens issued by the exchange for every $1 they pay in transaction fees
asset repeatedly to inflate market activity.
If the coins distributed by BitForex retain their value, customers can effectively earn free
issue.
Exchanges including DOBI Trade, FCoin, CoinSuper and CoinBene, which offer or have offered similar transaction mining incentives,
excludes volume from trade-mining venues and some other platforms
ProbeUnited States authorities have expressed similar concerns
Bloomberg reported in May that the United States Justice Department has opened a criminal probe into suspected illegal practices in crypto
markets, including wash trades
of suspected volume exaggeration is difficult
April, estimated in an interview that most of the trades recorded by crypto platforms globally are bogus
Combined volumes at all exchanges tracked by CoinMarketCap.com totaled about $15 billion over the past 24 hours.
Even the largest exchange
to start Eterna Capital, a blockchain investment firm
said automated, high-frequency trading strategies are likely fueling inflated volumes
Automated trading is widely used in traditional markets under regulatory oversight, though it can facilitate manipulation when unmonitored
executive officer of cybersecurity firm Hacken and founder of Crypto Exchange Ranks, which scores venues on metrics including liquidity and
On that metric, DOBI Trade, BitForex and Liquid stand out as having reported transactions many times larger than website visits (see the
users who deploy automated trading programs
Quoine CEO and co-founder Mike Kayamori said clients who have attempted wash trades have been banned from the platform and that the
the top 30 exchanges ranked by CoinMarketCap.com came from the eight venues with the highest volume-to-visits ratio, data compiled by
Bloomberg show.
CoinFi, a cryptocurrency research firm co-founded by former Goldman Sachs Group Inc
High volume-to-asset ratios can be red flags, Tam said, adding a caveat that some of the data on exchange wallets may be incomplete.
Of
course, not all digital currency exchanges are raising concerns among investors
Kazley, a Goldman Sachs and Cedar Lake Capital Ventures alum who co-founded Crescent Crypto Asset Management in New York.
Gemini Trust Co.,
the New York-based crypto exchange owned by Cameron and Tyler Winklevoss, has hired Nasdaq Inc
The twins, famous for their early role in Facebook, have also set up a self-regulatory organization called the Virtual Commodity Association
misled into trading on questionable venues
