Counterfeit trade volume an ongoing problem in the Crypto world

Didn`t you notice that new crypto-exchange platforms where you never heard of are springing up at the rate of knots on the internet and which you will find repeatedly on the exchange ranking of CoinMarketCap? Well, don’t be surprised.

This hype has increasingly come to be a focus of attention, after Bloomberg recently pulled into question how it is possible that a new platform that was launched just three months ago already is reporting a trading volume that is higher than that of the 217-year-old London Stock Exchange.

The exchange platform in question is the in Singapore-based BitForex, a new exchange that uses a controversial method known as “Transaction Mining” to report daily trading volumes of more than $5 billion ($3.4 billion at the time of writing.) In comparison, at the time of writing the volume of trade on Binance, a major exchange, is $1.33 billion.

Transaction mining implies that part of the transaction costs that are paid by users, is returned when they place orders on their platform in the form of a private token of the Exchange. In extreme cases, such as with BitForex, users can receive tokens which are worth more than the transaction costs that they have paid, if of course the value of the tokens remains stable. Transaction mining is a controversial practice because it only works in favor of the user as long as the token retains its value. And in order to maintain its value, it must constantly attract new users to make up for other users who make money.

Nevertheless, the practice was and is used by many of the exchanges. Neil Woodfine, a former executive at crypto exchange OK Coin that now runs the Bitcoin key-management startup Clavestone, told Bloomberg that the exchanges probably thinking that “everyone’s doing it, so I’m doing it,” adding that “New traders will get feedback very quickly from engaging with the market on trades not executing at the price they want.”

According to Bloomberg BitForex responded to the criticism by stating that the exchanges oppose all kinds of market manipulation and that their extraordinary stimulation program “soon” will end. The exchange did not respond to the question if they have the instruments to monitor and prevent fraudulent actions to trade on its platform.

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