Liquid, operated by Japan-based Quoine, said its volume doesn’t correlate with website traffic because of users who deploy automated trading programs. Quoine CEO and co-founder Mike Kayamori said clients who have attempted wash trades have been banned from the platform and that the exchange, which is regulated by Japan’s Financial Services Agency, adopts “stringent compliance measures.”
Liquid said website traffic on www.liquid.com is low relative to its volume since it recently changed the exchanges’ name and users are still migrating from its old websites.
Almost 40 percent of trades at the top 30 exchanges ranked by CoinMarketCap.com came from the eight venues with the highest volume-to-visits ratio, data compiled by Bloomberg show.
CoinFi, a cryptocurrency research firm co-founded by former Goldman Sachs Group Inc. analyst Timothy Tam, performs a similar analysis comparing exchanges’ reported volumes to the value of assets held in their crypto wallets. High volume-to-asset ratios can be red flags, Tam said, adding a caveat that some of the data on exchange wallets may be incomplete.
Of course, not all digital currency exchanges are raising concerns among investors. Major venues in the U.S. appear to be reporting “pretty accurate” figures and are willing to work with regulators, said Michael Kazley, a Goldman Sachs and Cedar Lake Capital Ventures alum who co-founded Crescent Crypto Asset Management in New York.
Gemini Trust Co., the New York-based crypto exchange owned by Cameron and Tyler Winklevoss, has hired Nasdaq Inc. to conduct market surveillance for Bitcoin and Ether trading as well as the auction that helps price Cboe Global Markets Inc.’s Bitcoin futures. The twins, famous for their early role in Facebook, have also set up a self-regulatory organization called the Virtual Commodity Association to root out bad behavior in the industry and work with the government.
Jim Bai, CEO of EverMarkets Exchange, says he’s optimistic crypto venues will become more trustworthy as the industry grows.
“Fake volumes are unfortunately all too common in today’s crypto-exchange ecosystem,” he said. “The industry will mature of course. As it does, more legitimate exchanges will come along and provide enough real, beneficial structural incentives so that people won’t be misled into trading on questionable venues. It will be a healthier marketplace.”
This article was provided by Bloomberg News.