Bithumb Accused of Inflating Reported Trading Volume

An investigation conducted by Crypto Exchange Ranks (CER) has alleged that Bithumb, the largest Korean digital currency exchange by volume, has drastically inflated its reported trade volume during the second half of 2018. The report asserts that a number of irregular patterns identified in Bithumb’s trade activity suggest “apparent trade manipulations being performed.”

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Report Accuses Bithumb of Dramatically Inflating Trade Volume

Research carried out by CER alleges that Bithumb uses “various trade volume manipulation techniques” to inflate its reported trade activity. The report also alleges that the exchange uses a “multi-factored approach” to conceal the volume irregularities.

The analysis asserts that Bithumb was ranked at the lower end of the top 10 exchanges by volume according to Coinmarketcap at the start of September 2018, posting approximately $350 million in daily trade.

The report notes that Bithumb’s 24-hour volume suddenly increased to over $1 billion during the second week of October, with the exchange’s purported volume continuing to rise before peaking on Nov. 11 with Bithumb ranked as the largest exchange by reported daily volume with $4.4 billion – more than ten times the average 24-hour volume posted during summer.

Three Irregularities Identified in Bithumb BTC Trade Volume

The report identifies three features of Bithumb’s recently reported BTC volume that it found to be indicative of manipulative practices.

The first feature points to “a significant rise in volume” that appeared to occur daily from Aug. 25 until Nov. 12 in which a large “comb-like” spike in trade activity is posted during the first minutes of 11.a.m local time that comprised between 90 percent and 95 percent of 24-hour trade volume. News.Bitcoin.com previously reported on the 11 a.m. Bithumb volume spike following suggestions that the daily surge in trade activity was a result of a trader or traders seeking to take advantage of the exchange’s 120 percent fee payback promotion through wash trading.

The second period, running from Oct. 8 until Nov. 11, was characterized by “irregular trade volumes not aligning with price moves.” The analysis found that said trading activity drove a rise in daily trade volume from 22,000 BTC on Oct. 8 to a peak of 106,000 BTC on Nov. 6, before volume dropped by more than 56x to 1,538 BTC on Nov. 12, down from 87,000 BTC during the previous day.

Lastly, the report notes an accelerated increase in the daily average transaction size executed on Bithumb. The analysis found that the average daily transaction size increased 8.7x from 0.21 BTC during the period preceding Aug. 25 to 1.83 BTC by Oct. 15, before posting a peak of 5.88 BTC on Nov. 11. Since Nov. 12, daily average transaction size has fallen to 0.17 BTC.

Daily Volume of Altcoins Exceeds Market Cap on Multiple Occasions

The report identifies a number of unusual patterns in the reported volume for a number of the most heavily traded altcoins on Bithumb from between Jun. 1 and Nov. 22, including LTC, ETC, XMR, ZEC, DASH, BTG, OMG, QTUM, and WTC.

Over the examined period, the report states that WTC saw the most intensive burst in reported trade activity, with daily volume of increasing by 350x from 348,000 WTC to 122.5 million WTC “on average during the pump.” WTC’s daily trade volume on Bithumb would then drop by 1,450x in a single day, falling from 206.7 million WTC to 141,800 WTC on Nov 12.

Daily volume was found to have exceeded the total capitalization of WTC by multiple factors on several instances, including on Nov. 8 when trade activity was four times that of WTC’s market cap.

The 24-hour trade volume for OMG and BTG were also “inflated to levels exceeding their capitalization,” with OMG daily volume reaching 3.5x its capitalization on Nov. 28, and BTG posting volume 1.8x its market cap on Nov. 22.

Do you think that Bithumb’s reported volume is inflated? Share your thoughts in the comments section below!

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