There are many ways to make a cryptocurrency exchange, but there has yet to be a perfect model on the market. Some platforms focus on their scalability, while others add multiple benefits and features that are unique to their product.
When a platform is lucky, they are able to find a balance in the performance and the security of their exchange. However, there are plenty of companies that end up coming out with nothing more than a plan to defraud customers, which is what one Medium blogger and Redditor pointed out in a recent article.
The article, titled, “Bitforex — The Biggest Wash Trading Exchange in the World,” was publicized on Reddit first. The Redditor introduced the article, saying,
“BitForex forges trading volumes to stay on the very top of the rating and draw the attention of crypto investors and new users. However, they have certain issues with processing and converting traffic into users as there is no clear policy regarding interaction with the audience. As a result, the exchange does not have a large number of real supporters and loyal community on social media, Telegram, or email.”
There have been many cryptocurrency exchanges to be established in the industry that have proven themselves to be reliable. Even during the ICO rush, platforms like Binance, Kraken, and Bitfinex were where token holders went to increase their liquidity and urge the listing of these token sales.
Considering the stringent requirements to have tokens listed, including clear interest from the public, some exchanges started participating in a process called wash trading.
As the Medium post by Alex Salidas describes,
“Wash trading creates a false sense of demand which makes it seem as though the exchange is very popular and worthwhile. Through this practice, some exchanges are able to lure ICO projects and customers by misleading the market.”
No sooner has the writer explained what wash trading is that they accuse Bitforex of taking part, claiming that they fake 93% of the volume found on the exchange.
The Blockchain Transparency Institute (BTI) recently published a report that pointed fingers at multiple exchanges in the top 25 rankings at CoinMarketCap for their own “fake volume.” According to their chart, which can be seen below, only 7% of Bitforex’s volume is considered to be authentic, while the rest is assumed to be created through wash trading.
Now, the only reason for Bitforex to participate in wash trading at all is if they are gaining benefits from it, which also comes at a cost to the rest of the crypto community. Before a project can be listed with Bitforex, they are charged a 10 BTC listing fee, which must be done with
“false trading volume and a fake legal entity.” While some crypto projects believe that they are on their way to profits and publicity, the blog suggests that “they are simply giving away precious funds.”
The resulting fake trading volume is lured to bring in customers, who believe that the high volume is indicative of a top exchange. As customers join, Bitforex is able to make money through the fees charged for various activities on the exchange.
The writer then cites multiple articles that support these statements, which can be viewed from the links below:
Verifying the trading can be done in a few ways, like checking the number of visitors on the exchange. Statistically speaking, every trader will not be a massive spender with hundreds of thousands of dollars at their disposal, so the trading volume would likely be proportional with their customers.
This data can easily be checked on CoinMarketCap.com. The blogger notes,
“[B]ased on the volume data from CMC and the traffic data the average visitor to the Bitfinex exchange is trading at a rate about $654 per month whereas on Bitforex the average visitor is trading about $15,535 per month! This simply is not realistic.”
Sourced from SimilarWeb, the blogger includes the following images to demonstrate the point:
For further evidence of this wash trading taking place, the blog includes the following video links, showing the Bitforex bot causing fake trades.
Considering everything that the crypto community knows about Bitforex’s actions, and the details in this blog, the first (and presently only) comment on the Reddit thread sums up the situation best. The user simply asks, “How is this news?”