South Korea’s second largest crypto exchange Bithumb is the latest trading platform to allegedly have a fake daily volume of up to $250 million since 25th August.
Argentinian crypto trader and analyst Alex Kruger took to Twitter to expose this.
He claimed that it was directly linked to Bithumb’s “airdrop”, which was apparently created with the “good” intention of offering traders a rebate.
“Bithumb offers 120% payback of trading fees as an airdrop,” Kruger said. “Daily limit is one billion Korean Won ($900,000), first come first served… Trading fees are 0.15% taker. Wash trading conducted by entering two opposite limit orders => Total fees 0.3%. Rebate is for 120% => 0.36%.”
Kruger further explained that for traders to claim the full $900,000 rebate, a single trader or group of traders would need to have daily transactions worth over 279 billion KRW ($250 million).
In short, traders resorted to wash trading, a form of market manipulation by which a trader simultaneously sells and buys the same financial instrument to create misleading, artificial activity in the market space.
In the case of Bithumb, the traders manufactured the more than $250 million in wash volumes within minutes to claim the full daily trading fee airdrop equivalent to $150,000 until the promotion ends.
67% of daily volume being wash traded
Last week, the Blockchain Transparency Institute (BTI) published a report revealing that crypto exchanges around the world were faking $6 billion of its daily volume. However, they said that Bithumb was among the few crypto exchanges that were actually being accurate when reporting trading volumes.
“Some cryptocurrency exchanges like Bittrex, Kucoin, and Bithumb have legitimate volumes, given that their unique visitor counts are proportional to their trading volume,” BTI experts said.
However, “tallying up the volume numbers of the top 130 exchanges, it is estimated that over $6 billion in daily trade volume is being faked with over 67% of daily volume being wash traded. Over 70% of the CMC top 100 is likely engaging in wash trading by at least 3x their stated volume,” the report states.
Bitforex pumped its own trading volume
A couple of months ago, Crypto Exchange Rate (CER) analysts took a look at Bitforex and concluded the exchange’s administration “more than likely pumps own trading volume and, therefore, provides misleading statistics to end users and ICOs willing to list tokens on a top ten exchange”.
The BTI specialists explained that crypto exchanges fake volumes to attract investors who prefer to do their crypto business in platforms that have high trading volumes rather than in those with lower statistics.