The recent report by Bitwise on fake trading volume data has created a massive stir in the overall crypto industry. As per the report, 95% of BTC trading volume reported by crypto exchanges is fake. Such shocking revelations have naturally left many new crypto traders in doubt and fear of being duped by unethical crypto exchanges. And that implies a huge loss for the crypto community overall.
Fake volume data is mostly produced by centralized crypto exchanges. According to experts, unethical centralized exchanges are taking to means like wash trading to show pumped up reports of trading volume. Besides, the very infrastructure of centralized exchanges further facilitates these platforms to show inflated data. The main objective here is to entice new traders to exchanges through manipulated data which will increase the traffic flow of these exchanges.
“For centralized crypto exchanges, it’s really easy and cheap to carry wash trade & bot trading to spike up trading volumes. Moreover, as these exchanges follow a ‘centralized’ architecture, these are controlled by one single central authority. Thus, the numbers, revenues, operations and business models of these exchanges are always opaque to public”, stated Sydney Ifergan, top crypto expert and advisor of rising decentralized crypto exchange Decoin.
As per seasoned crypto investors and experts, decentralized crypto exchanges hold the key to eliminate the problems of fake volume data. The primary reason is decentralized exchanges are not governed by one single central authority. As a result, such exchanges are always more transparent with their facts and practices and hence way fairer compared to their centralized counterparts.
“Decentralized exchanges tend to score over the centralized portals in multiple aspects- transparency, liquidity and of course security. Decentralized exchanges have no means to hide their liquidity or trading volumes given their innate ‘de-centralized’ infrastructure. As a result, these platforms can’t dupe you with fake or inflated data on trading volume or any other aspect”, added in Mr. Ifergan.
Sasha Ivanov, another major crypto expert and CEO of a top blockchain development firm, also shares the same view-
“Although decentralized crypto exchanges are in their nascent stage now yet these are going to gain solid traction very soon. Thanks to their very decentralized environment, it will be way simpler to weed out fake data effectively across the crypto community. It’s because, in such an environ, everyone will be able to see every trade being carried. Thus, it will be easier to point out if any sort of suspicious activity creeps in the exchange. We are expecting a triumph of decentralized exchanges in near future.”