Data Firm: Just 17 Percent of Reported Bitcoin Volume Is Trustworthy

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Nomics, a cryptocurrency data and analytics firm backed by Coinbase Ventures, has launched “Transparent Volume,” a service which will provide a new means of reporting trading volumes across cryptocurrency exchanges.

Just 17 Percent of Reported Bitcoin Volume Is Trustworthy

According to the firm, the product is designed to help track real-time asset movements across exchanges, thus providing a holistic view of the volumes traded.

Nomics describes Transparency Volume as a more accurate data source than what is provided by other aggregators because it is less likely to include wash trading and other misleading forms of volume. This volume is tied to another Nomics score, which ranks exchanges based on the granularity of the data they provide.

“Transparent volume represents the amount of volume deemed ‘trustworthy’ and high quality by Nomics,” according to the firm. “Specifically, transparent volume is the amount of volume for a given cryptoasset that’s moving through transparent exchanges (i.e. exchanges to which we’ve awarded an A+, A, or A- transparency rating.”

Based on this criteria, Nomics reports that just 17 percent ($1.96 billion worth) of the reported bitcoin volume is trustworthy, while 35 percent of it is categorized as “fair” to “poor” (a combined $3.99 billion worth).

“While transparent volume is highly correlated with upstanding exchange practices, we cannot guarantee that 100% of transparent volume is free of fake-volume,” according to Nomics. “We can, however, guarantee that the volume is auditable, that high granularity data is available for this volume and subject to analysis and scrutiny.”

The Transparent Volume Problem With Bitcoin

The launch of the Transparency Volume service is part of a growing trend around more clear and accurate crypto asset volume data. The lack of this data was put under a microscope by Bitwise Asset Management in a white paper submitted to the U.S. Securities and Exchange Commission (SEC) in 2019. 

In the report, the crypto asset management firm pointed out several inconsistencies with data tracking in the crypto market.

While it did mention that the legitimate part of the market comes with some level of efficiency, Bitwise went in on exchanges calling out as much as 95 percent of them report fake trading volumes on their platforms. 

Bitwise claimed to have analyzed data from 83 exchanges, examining components such as volume spike alignments, histograms and spread patterns. It concluded that only 10 of the exchanges display their actual trading volumes, although they total just 5 percent of the reported trading volume.

Fighting back, CoinMarketCap — a go-to aggregator for cryptocurrency trade volume — instructed exchanges to provide mandatory application programming interfaces to help improve credibility and transparency. 

Still, Nomics is apparently looking to take transparent volume reporting up a notch, arguing that this is critical to the future of the cryptocurrency at large.

“One of the SEC’s major concerns in approving a Bitcoin ETF is the percentage of trading volume that is unserveilled and subject to manipulation, toxic influences, etc.,” according to the firm. “Our transparent volume metric is intended to help institutions, state actors, and investors assess the percentage of reported trading volume for a given cryptoasset that is auditable and transparent.”

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