99.9% Fake Volume? Are You Holding One of These Low-Liquidity Altcoins?

It has been suggested more than once that a majority of cryptocurrency trade volume is not only manipulated, but outright fake.

One independent source posited in March that 75% of crypto trade volume was faked; another suggested the number was closer to 95%. That second number is important, because it’s the number Bitwise used in their official application to the SEC for a Bitcoin ETF.

But according to an independent aggregator which measures the difference between real and faked volume, that number could really be as high as 99.95%.

Low Liquidity Altcoins – A Danger to Hold?

As seen in the screenshot below from Open Market Cap, many well-known altcoins currently suffer from a severe lack of real liquidity.

OpenMarketCap Volume
The percentage difference between what CoinMarketCap reports, and what really changes hands | Source: OpenMarketCap

Bytom (BTM) is judged to be operating with 100% fake volume. That number is rounded up from 99.95% – the actual difference between CoinMarketCap’s numbers, and the volume taken from ‘Real 10’ exchanges.

The discrepancy between Ethereum Classic’s figures also exceed 99%, but with over $4 million in real volume remaining after the calculation, that still leaves a sizeable chunk for the average investor to dip in and out of.

The same can be said for Dash and Qtum to some extent, however, that ~$3 million is not concentrated in one place, but is spread across multiple platforms.

Many people are under the assumption that H1 of 2019 saw the largest influx of cryptocurrency trades in history. That’s the impression gained from looking at CoinMarketCap. But if fakery has been afoot all along, then what does that say about 2017-2018’s mega bull run?

Unfortunately, it will be hard to find reliable historical data, but if these major altcoins have such low volume right now, how much could they have had 18-months ago? The next obvious question would be: how many people were really able to cash out for major profits back then?

Positive Spin: Room to Grow

Many factions within the cryptocurrency space probably couldn’t care less about fake volume. Not unless it impacts them directly. Day-traders, developers, long-term holders who assume the entire sector will grow before they plan to cash out; none of these are really impacted by fake volume figures.

In fact, many will have unknowingly (or knowingly) benefitted from price pumps associated with the inflated numbers in the past.

As ever, the fake volume phenomena can be spun into a positive. If real volume figures are this low right now, it means we’ve all entered the game earlier than previously thought. As in, 99.95% earlier.

One thing to note is that Bitwise have naturally excluded any and all decentralized exchanges for their list of trusted platforms. Right now, that doesn’t affect the numbers too much. But with the launch of Binance’s own ‘decentralized’ trading platform, and the recent launch of Komodo’s (KMD) P2P, non-KYC DEX, as well as the growth of the likes of Kyber Network (KNC); there could be significant volume unaccounted for among these decentralized, unregulated platforms.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Greg Thomson is a freelance writer who contributes to leading cryptocurrency and blockchain publications like CCN, Hacked, and others.