Exchanges are incentivized to report fake volume to attract initial coin offering (ICO) listing fees, according to the report. Bitwise says that these fees can run between $1 million and $3 million per listing.
In the Bitwise study, there were 10 exchanges accounting for the bulk of the real average daily volume of bitcoin trading. While U.S.-domiciled exchanges account for less than 1 percent of the reported trading volume, the study suggests that U.S. exchanges account for up to 30 percent of the real daily trading volume in bitcoin.
Most reported trading takes place on exchanges with “unknown domiciles,” according to Bitwise. The 10 exchanges responsible for the bulk of real trading volume tend to be better capitalized and more closely regulated than others.
Screening out the “fake” bitcoin volume results in a market with tight spreads, tight arbitrage and consistent prices, said Bitwise.