“All users are contributors to this exchange” and should be rewarded, Jin said by email, adding that BitForex “opposes” all kinds of manipulation and that the incentive program is set to end soon. He didn’t elaborate when asked whether the venue has tools to monitor and prevent abusive trading. Jin said it’s “technically possible” for users to trade with themselves using two accounts, and that the exchange is working to address the issue.
Exchanges including DOBI Trade, FCoin, CoinSuper and CoinBene, which offer or have offered similar transaction mining incentives, didn’t reply to requests for comment.
CoinMarketCap.com, which compiles its data from the exchanges, publishes an “adjusted” ranking that excludes volume from trade-mining venues and some other platforms. “We have multiple automated alerts detecting anomalies in the data,” CoinMarketCap.com spokeswoman Carylyne Chan said in an email.
Like other crypto exchanges in Singapore, BitForex isn’t directly regulated by the Monetary Authority of Singapore. “Digital tokens are mainly traded on opaque markets, with no regulatory protection for investors,” MAS said in an emailed response to questions. “There may not be enough active buyers or sellers and consumers may not be able to exit their token investments easily.”
Criminal Probe
U.S. authorities have expressed similar concerns. Bloomberg reported in May that the U.S. Justice Department has opened a criminal probe into suspected illegal practices in crypto markets, including wash trades. In a report last week, New York’s attorney general said the industry has generally failed to adopt serious market surveillance measures to detect and punish suspicious trading, though it didn’t single out any venues for wrongdoing.
Market participants say quantifying the scale of suspected volume exaggeration is difficult. But Calvin Cheng, a Singaporean entrepreneur who bought a stake in China’s first Bitcoin exchange in January and founded another venue in April, estimated in an interview that most of the trades recorded by crypto platforms globally are bogus. Combined volumes at all exchanges tracked by CoinMarketCap.com totaled about $15 billion over the past 24 hours.
Even the largest exchange operators can’t be trusted, warned Asim Ahmad, who recently left BlackRock Inc. to start Eterna Capital, a blockchain investment firm. He based the assessment on his own trading experience and time spent watching exchanges’ order books.
Both Ahmad and Clavestone’s Woodfine said automated, high-frequency trading strategies are likely fueling inflated volumes. Automated trading is widely used in traditional markets under regulatory oversight, though it can facilitate manipulation when unmonitored. The report from New York’s attorney general said it’s "of particular concern" that many platforms have no formal policies governing automated trading.
BitForex may just be “one of the worst offenders in this parade of inflated volume,” said Dmitriy Budorin, chief executive officer of cybersecurity firm Hacken and founder of Crypto Exchange Ranks, which scores venues on metrics including liquidity and security.
Website Traffic
As a rough check on exchanges’ numbers, some traders have started comparing reported volumes to website traffic. On that metric, DOBI Trade, BitForex and Liquid stand out as having reported transactions many times larger than website visits (see the above chart for more details).