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How to avoid ‘fake crypto' trading

by , 16 July 2019
How to avoid ‘fake crypto' trading
Like many financial instruments, it's in a crypto's interest to get big trading volume numbers on exchanges.

This shows that people are taking an interest in it and are actually using it. It shows investors believe in the crypto's project.

It is also in exchanges' interest to have large volumes of crypto traded. The higher volume your exchange has the more trustworthy it seems, and the more liquid its markets are.

In short, more volume is good for cryptos and good for exchanges.
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The problem is…
Many unscrupulous crypto projects and exchanges are happy to fake this volume via a technique called wash trading.
A wash trade is a form of market manipulation in which an investor simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace.
Here’s how it works in crypto markets…
Crypto projects – or investors who want to make those projects look popular – engage in wash trading across different exchanges.
Many exchanges allow this to happen under their watch because exchanges make their money from fees. So more transactions equals more money for the exchange. Not only that, but it makes the exchange actually look more reputable as its trade volume is higher.
It’s also well worth it to the wash trader as it can end up pumping the price of their crypto, as it gains attention, and then they can sell it at a higher price than it’s really worth.
In regulated markets wash trading is illegal. However, crypto markets are unregulated.
According to Bitwise’s April 2019 market surveillance report, between 88%-92% of the volume in crypto markets is wash traded and therefore fake.
All exchanges combined are currently reporting around $50 Billion in daily volume on CMC. After removing all the wash traded volume via our algorithms the accurate number is around $4-5 Billion. About 88-92% of daily trading volume is fabricated depending on the day. Bitcoin’s daily trading volume is about 92% fabricated.”
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So, how can you avoid the fake volume problem?
The best way to avoid cryptos and exchanges with fake volume is to only use exchanges that have passed Bitwise’s testing.
According to Bitwise’s latest rankings, the top 5 exchanges right now are Binance, Coinbase, Huobi, Upbit and Bitfinex.
If you want to get up to date numbers, you can find their rankings page here.
However, another good way to avoid getting scammed when investing in crypto is to educate yourself. For instance, learn from an expert who knows the crypto markets in and out.
The South African Investor’s Sam Volkering knows more about crypto investing than anyone I’ve ever met. He’s been in in from the very beginning, and his book: Crypto Revolution will give you everything you need to know to get started investing in crypto for yourself – and a whole lot more.
See you next week,
Joshua Benton,
Managing Editor, Real Wealth 

How to avoid ‘fake crypto' trading
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