On Crypto Exchanges, the Trades Don’t Always Add Up
26 Jul 2019

When Bitcoin hit a 17-month high in late June, the milestone was met with some skepticism. Big jumps in a short period of time can signal that someone is trying to artificially move the market, says John Griffin, a finance professor at University of Texas at Austin. “The extreme volatility suggests that manipulation is rampant.”

While many cryptocurrency transactions occur on public digital ledgers known as blockchains, other trades take place on more than 200 global crypto exchanges. Major exchanges that trade traditional assets, such as stocks, are heavily regulated. Crypto exchanges mostly are not, and investors have no way of knowing whether the trading volume and prices they report reflect real activity or market manipulation.

Many exchanges routinely fake their volumes to attract more coins and users, says Hunter Horsley, chief executive officer of Bitwise Asset Management, which runs crypto index funds in San Francisco. One goal is to get listed higher up in the rankings of CoinMarketCap.com, the main site used by investors to keep tabs on global crypto prices. Coin promoters have been known to hire outfits to inflate their trading volumes on exchanges by trading back and forth between two accounts. In a May report, Bitwise said that 95% of Bitcoin exchange trading volume listed on CoinMarketCap.com is fake or noneconomic in nature. “In crypto, the risk is crypto exchanges,” says Jeff Dorman, chief investment officer of Arca, an asset manager that invests in cryptocurrencies and other digital tokens.

By Olga Kharif, Bloomberg Businessweek, 25 July 2019

Read more at Bloomberg

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