Report: BitHumb counterfeited 94% of the trading volume. Most of the manipulated currencies include WTC, LTC, ETC, XMR, ZEC, OMG and BTG.

As Yoseph Young explains, in illiquid markets and trading platforms with inflated volumes, it is relatively easy to manipulate the price of small cryptocurrencies. While many important factors and an unlikely correlation of events to reduce the price of major cryptocurrencies like Bitcoin and Ethereum are needed, research shows that a similar result can be achieved in a market with small cryptocurrencies with capital between $ 50,000 and $ 100,000.

John Koestier sheds more light on the phenomenon of manipulation of the exchange by exploring another relationship, this time by a new service of evaluation of the trade of cryptocurrencies CER that has accused Bithumb, the second largest encryption exchange in the world by volume, to falsify much of its volume trading from the end of the summer 2018.

This event is called wash trading, or at the same time you sell and buy at the same time to create misleading and artificial activities.

Bithumb sits at the bottom of the top ten global stock exchanges measured by CoinMarketCap, at about $ 350 million in daily trading volume. But by November 11, Bithumb reached a peak of $ 4.4 billion, over 12 times more. Today, Bithumb is in second place on CMC's cryptocurrency list, measured from the reported volume to $ 1.4 billion. (Bithumb does not appear in the "adapted volume" ranking of CMC.

So, why is it so according to CER?

In addition, the average size of transactions increased from 0.21 BTC at the start of the summer to 5.88 BTC very significant, or 37,600 USD, from October 15th to November 11th.

According to the ERC, other currencies showed similar models, including LTC, ETC, XMR, ZEC, OMG and BTG.

A currency, the WTC, has shown the most intense artificial activity, says CER.

"The WTC stands out from all the coins we have observed, having only been traded on the exchange in the last day of August and had the shortest pumping period started on 28 October and lasted until 11 November", CER states in a document shared with me. "For this reason, his pump was one of the most intensive: Waltonchain's inflated daily volume rose 350 times from 348k WTC (on average before the pump) to 122.5 million WTC (on average during the pump) only to then decrease by 1,450 times in one day from 206.7 million WTC to 141.8k WTC on November 12th. "

As might be expected, BitHumb has rejected the hand accusations.

"Bithumb is not doing anything to swell the volume of trade, Bithumb does not sell coins based on mines, Bithumb is trying to get more customers by offering various promotions like any other company in the world as a normal business."

Why do the exchanges show the false volume?

CCN clarifies the meaning of this and why exchanges do it. According to BTI, most of the traffic and volume of cryptocurrency trade derive from affiliate links mentioned by CoinMarketCap. Some exchanges had 83% of their referral volume from CoinMarketCap.

Therefore, it is of fundamental importance for cryptocurrency exchanges to appeal to investors on cryptocurrency market data platforms with high volumes, as investors tend to avoid exchanges of digital assets with low liquidity due to the difficulty of buying and selling cryptocurrencies low market capitalization.

"It was also detected by SimilarWeb data that up to 90% of the reference volume from new and aspiring exchanges comes from ranking pages with a maximum of 83% from CMC, providing the reason for many exchanges to increase the volume coarsely through commercial washing practices, "The report concluded.

An immediate solution to the false and inflated volumes is to encourage market data providers to try to filter the washing and bot operations. But, at the moment, unless the regulations require otherwise, it is extremely difficult for platforms to recognize and eliminate exchanges that increase their volumes illegitimately.

Potential damage

Today the hidden dangers of these practices elucidate. If trade with highly inflated trading volumes remain undetected, this could significantly overshadow the reputation of the entire sector struggling to get out of a legal gray zone and become more transparent.

Inexperienced traders may want to test a new platform that has quickly reached the summit and, therefore, seems highly reliable, but will later face problems with English, bad service and potential security problems. As a result, investors will begin to lose confidence in the market.