How much fake volume plagues the cryptocurrency industry? Our surface research shows a lot.

The blockchain and cryptocurrency sector has no doubt seen exponential growth in the last few years, despite the recent market correction. Although the market has changed for the better, things still aren’t what they seem.

While exchanges are the backbone of the cryptocurrency industry as we know it, scratching under the surface of these exchanges reveals something very interesting and slightly unnerving.

Simple Analysis

We are going to do a brief yet informative analysis on 2 different exchanges with similar volume numbers to see how they compare beyond simply looking at volume metrics alone.

For this example we will be comparing Poloniex and Qryptos using Alexa’s web traffic tool.

Alexa’s web traffic tool shows the comparison of 2 exchanges with similar volume. One of them appears to have 10x more traffic (Poloniex) than the other (Qryptos). Click the image to scale it larger.

The Alexa ranking is the key piece of information here that sheds light on the reality of these exchanges by providing important information such as global ranking, and basic traffic metrics.

When compared side by side we can clearly see that something doesn't add up. Qryptos claims to have a similar trading volume like that of Poloniex without having the traffic numbers to do so. Although the Qryptos exchange may have a great user interface, there is clearly A LOT of wash-trading going on behind the scenes.

Lets dig even deeper shall we?

Fortunately, one of our internal team members is an SEO guru and happens to know how to perform more in depth research on website traffic in particular. He shed some light on this analysis by pulling some basic numbers using Ahrefs, which is a search engine optimization tool for analyzing traffic, backlinks, domain metrics, etc.

The staggering results are displayed below.

Using Ahrefs data we also added as a 3rd comparison candidate to illustrate just how incorrect Qryptos numbers really are. Click the image to scale it larger.

Liquidity is important

There’s no denying that liquidity is an incredibly important factor, for both sides of the spectrum. An exchange should always have a healthy amount of users upfront if they want to charge top dollar to list a token or coin. Without a strong user base the foundation of trust established with an exchange simply falls apart.

Why this is a problem?

Falsifying volume and liquidity means there are little to no genuine buyers out there actually purchasing cryptocurrency. As an investor, you could be left with a coin that will be impossible to sell in the future. As a project owner, you could be spending thousands to list your token on an exchange that has no real user-base, wasting valuable investor money listing on a totally bogus exchange. It’s not uncommon for some exchanges to charge upwards of $100,000 for a single listing, and that doesn’t even include token stake.

Imagine spending that kind of money only to find out $180 dollars of real daily trade volume took place…

Who’s at fault?

Its not entirely the exchanges fault when it comes to fake volume. In many cases paid market makers are responsible for carrying out this shady maneuver however, implementing security measures should be an exchanges top priority.

Choose wisely

Choosing a legitimate exchange is an absolute necessity when trading cryptocurrencies. Artificially generated volume often leads to price inaccuracy and heavy price manipulation when purchasing or selling at market price. Be careful out there and take your time when choosing the exchange that is right for you. Use valuable resources like Alexa and Ahrefs to get a clear picture of what exchanges are really up to.




Quantitative and DeFi Banking in the Blockchain Sector

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Quantitative and DeFi Banking in the Blockchain Sector

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