Binance CEO Changpeng Zhao agrees with the possibility of crypto exchanges falsifying trading volumes, and thinks there are several ways that could make the volume appear significantly larger than it actually is.
Last month, the media was full of headlines about “honest coinmarketcap” and inflated readings of crypto exchange trading volumes, which were revealed by Andrew Renhack. Binance CEO Changpeng Zhao shares this point of view and believes that some cryptocurrency platforms operate with daily trading volume figures that may simply not exist.
According to him, there is a practice of artificially increasing trading volume by double recording a transaction. The essence is very simple: when a purchase and sale transaction is carried out, two traders are involved. Essentially, they buy 1 bitcoin, and 2 bitcoins are recorded in the sales volume: one as sold, the second as purchased. Such an entry increases trading volume by 50 percent.
In addition to this, Zhao notes, there are other obvious things. When candlestick charts show high volume at a stable price and low volume at an active price movement, this indicates, according to the CEO, so-called washout trading. This is the practice of manipulating the level of activity of financial instruments. A wash trade occurs when an investor buys coins through a broker and then immediately sells them through another broker, creating trading volume.
Additionally, some exchanges have listing requirements for cryptocurrencies, requiring guaranteed trading volume. Then so-called market makers are hired, who open 2 accounts and simply trade with each other. Such transactions take place fictitiously, without the exchange of coins, but the trading volume is generated.
Another indicator pointed out by the director of Binance is traffic analysis. This analysis of the scale of some web traffic provides a clear picture of the disparity. Many of the crypto platforms have high trading volume, and yet only 10 percent of the web traffic is needed to support such activity.
CEO Changpeng Zhao emphasized that Binance does not use such tactics and is focused on fair competition and transparent trading.
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