Fake volume became one among crypto assets’ leading narratives of 2019, as a U.S. regulatory application for an exchange-traded product (ETP) followed the work of earlier researchers in showing how the maximum amount as 95 percent of lit markets’ reported bitcoin trading volume could be fake. That’s resulted in conservative estimates of bitcoin volume that are probably far too low, and a condition of uncertainty on what proportion bitcoin is really being traded.

You could consider fake volume as a natural feature of crypto’s novel market structure, in which:

liquidity is split among many competing exchange venues
trading fees are high relative to other asset categories
exchanges provide data for free of charge
In crypto markets, data may be a marketing tool rather than a revenue source, and a few exchanges are shown to use it that way, exaggerating volumes so as to reinforce their perceived liquidity.

These realities and therefore the data presented by researchers like BitWise in its March 2019 ETP application have led market data aggregators to regulate their volume representations. The chart below compares adjusted daily bitcoin volume figures for the month of November offered by two such aggregators, Messari and Nomics, against the unadjusted reported daily volume figures offered by CoinMarketCap, historically the best-known market data provider.

Chart showing bitcoin volume vs time
CoinDeskResearch_BitcoinVolume
The discrepancy between the 2 samples of adjusted bitcoin volume shown stems from the list of exchanges each data aggregator includes. Messari limits its “real” bitcoin volume number to the ten exchanges identified in BitWise’s ETP application. Nomics rates 32 exchanges high enough on its “transparency rating” metric to incorporate them in its “transparent volume” aggregate.

In its October response to an application for ETP approval by BitWise, a San Francisco-based fund manager, the U.S. Securities and Exchange Commission (SEC) noted exchanges that BitWise excluded as fake are likely supporting some volume of real trading activity, a “gray area” that BitWise conceded during a reply to comments on the appliance .

The SEC’s response specifically mentioned HitBTC, Huobi, OKEx and a couple of exchanges based in South Korea , which were excluded thanks to capital controls there. Nomics’ adjusted bitcoin volume number includes HitBTC, but not Huobi, OKEx or any of the larger South Korean venues.

Anecdotally, traders say excluding liquid markets wholesale doesn’t add up – especially Huobi and OKEx. “I’ve traded on OK since 2013, and it’s executable,” said Dan Matuszewski, former head of trading at Circle, a Boston-based developer of monetary products in crypto. “That liquidity is there. Those markets are actionable. Do i feel the amount is one hundred pc true? Absolutely not.”

Bid-ask spread on various bitcoin markets over time
CoinDeskResearch_BitcoinBidAskSpread
The chart above shows that, a minimum of on Huobi, some bitcoin-base pairs are nearly as liquid as they’re on Coinbase, consistent with order book data provided by Kaiko. Real daily bitcoin volume in November was probably somewhere between the $1.97 billion “transparent” volume that Nomics reported and CoinMarketCap’s unadjusted average daily volume figure of $22.56 billion – and albeit Nomics’ number excludes some major exchanges, it probably gets closer to the reality than the unfiltered data on CoinMarketCap.

To some extent, it doesn’t matter. Aggregate bitcoin volume may be a general datum , unlikely to tell a selected investment decision. In crypto’s fragmented markets, volume at specific venues, selected for his or her relevance to geographies or categories of investor, could also be better signals. For example:

Coinbase’s cash market volumes as an indicator of latest retail participation
Activity on localbitcoins or regionally dominant exchanges
CME and Bakkt bitcoin futures activity as an indicator folks fiduciary institutions’ participation
However, a reliable figure for bitcoin’s aggregate volume is vital when establishing market infrastructure like volume-weighted indexes. The crypto asset category’s inability thus far to choose such variety is an indicator of its immaturity. When media organizations emerged on the web , their new approaches to revenue also brought new questions on which information might be trusted. an equivalent thing is occurring in crypto.

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Story from News
LedgerX Names Former Chief Tech Officer as New CEO
Jan 10, 2020 at 22:01 UTC
Courtesy Juthica Chou
LedgerX co-founders Zach Dexter (left), Juthica Chou and Paul Chou image via CoinDesk archives

Nikhilesh De
LedgerX Names Former Chief Tech Officer as New CEO
LedgerX announced Friday that co-founder and former chief technology officer Zach Dexter has been named the new CEO of the bitcoin derivatives company.

The company suspended CEO Paul Chou and COO/CRO Juthica Chou last month, with no explanation. the 2 were also co-founders of the corporate . Depository Trust and Clearing Corporation president Larry Thompson was named interim CEO and lead director of Ledger Holdings.

In a statement, Thompson said, “since my involvement with the corporate began, we’ve kept in close contact with all of the company’s stakeholders including employees, investors and regulators and have kept the CFTC fully apprised of the company’s actions including the recent financing.”

His statements would seem to conflict with a letter sent to LedgerX’s board and therefore the CFTC Office of the military officer by a member of its board of directors. within the letter, Nicholas Owen Gunden wrote that as an investor, he had received limited communications from the corporate , and was concerned about its operations.

LedgerX also announced that it closed a “significant” financing round “led by the company’s largest investors including Digital Finance Group.” the quantity raised wasn’t disclosed, but the funds are going to be wont to cause more senior executives, the discharge said.

Dexter was a neighborhood of the LedgerX team for the primary five and a half years of the company’s operations, leaving in May 2019 to hitch Mirror, a tech fitness startup.

Thompson and Dexter didn’t immediately answer an invitation for comment.