According to the research of a cryptocurrency trader, the cryptocurrency volume on most of the major exchanges like OKEx, GDAX, Kraken, and Bitfinex are either inflated or fake.
Cryptocurrency volume research of OKEx, Bitfinex, Kraken & GDAX
In a report revealed by a cryptocurrency trader, Sylvain Ribes, he talked about his investigation into the volumes of most of the cryptocurrencies that helped him discover that the trading volume of several big exchanges like OKEx is either fake or inflated.
He goes on to prove that over $3 billion of total crypto assets volume is fabricated by utilizing the publicly available data, while further mentioning that “OKEx, #1 exchange rated by volume, is the main offender with up to 93% of its volume being nonexistent.”
Ribes utilized a self-named method “slippage” where the liquidity of digital assets is tested by selling an asset worth $50,000 each across different exchanges. After the sale, he measured the decline rate in a specific crypto on a particular exchange to measure its liquidity.
Ribes uses this method for crypto liquidity on OKEx, Kraken, GDAX and Bitfinex exchange. The Hong Kong-based OKEx has been once the biggest crypto exchange worldwide, prior to China crackdown. The rest of the three exchanges are regulated ones that provide crypto-to-fiat trading. Bitfinex is a Hong Kong-based exchange and Kraken is based in San Francisco while GDAX is operated by Coinbase.
Inflated & fabricated volume
If we follow the chart below, GDAX and Kraken record the smallest slippages that means they have enough liquidity to manage their large sell-offs. When it comes to OKEx, it has a higher rate of slippage in comparison to the other three.
On OKEx, the sell-offs of $50k lead to high slippages as the order books get unstable due to falling in the crypto value. Whereas on GDAX, the slippage is about 0.1 percent.
Ribes details in his research that the cryptocurrency volumes of OKEx among other exchanges are inflated and fabricated as seen by the way the small sell orders manipulate the cryptocurrency prices and order books. Ribes point out that:
“The chart is striking. It shows how, although all first three exchanges seem to behave rather similarly, OKex pairs, in red, all have a massively higher slippage with regards to their volume. Like I explained before, this can only mean that most of the volume OKex claims are completely fabricated.”
Ribes further reveals that this chart is inclusive of over 4 percent slippages that shows OKEx’s low liquidity and superficial order books, unlike the first chart that excluded this slippage.
Price manipulation plausibility
The presence of inflated cryptocurrency volume in trading platforms and illiquid markets make it is easy to manipulate the crypto prices. Ribes also mentions that it doesn’t affect only small cryptos but also the trading pairs of big cryptocurrencies.
As explained by him:
“Many pairs, albeit boasting up to $5 mln volumes, would cost you more than 10 percent in slippage, should you want to liquidate a mere $50,000 in assets. Those pairs included, at the time of the data parsing (March 6, 2018): NEO/BTC, IOTA/USD, QTUM/USD. Hardly illiquid or low-profile assets.”
Being still in its early stages of development, matters like fabrication and inflation of trading volumes of such crypto exchanges can be detrimental to the market, hence need serious consideration.
What are your views on the corrupt practices adopted by these exchanges? Share your thoughts with us!