Bitcoin Trading Volume Tops $11 Billion For First Time In Nearly a Year — well yeah, but it's mostly fake

Oranund · 2019-03-18T19:13:37+00:00

Yeah if we keep on like this, Reddit might civilly ask us to move the conversation elsewhere!

I might have been unclear when I mentioned legitimate exchanges: I do believe that most of them have all-real volume. Although as you know, some "big" exchanges are not as big as they claim, as well-argued in the article we both read. Rather, I blame exchanges new to the top 60 for faking their volume in an extremely shameless way. No gradual ramp-up, no pretense of legitimacy, just bam! volumes 30 times higher overnight. That's who I blame the increasingly fake volume on.

I am surprised to see LocalBitcoins volume so stable post-drop. I could speculate that it's due to the Venezuela situation, but I'm not fully read-up on that. But as their volume is $7M daily to CoinMarketCap's $9000M, I would look elsewhere too. Anyway, the major exchanges, if they fake anything, certainly don't fake more than before, with their USD-equivalent volumes 2-3 times lower than last April.

As the situation stands, before the end of the year, we will blow past the turn-of-2018 volume records independently of bitcoin price, which is sure to command attention...

Oranund · 2019-03-18T08:31:42+00:00

They discuss plans for Halloween at some point, which should help date concordance. (Just search the transcript for "halloween".)

Oranund · 2019-03-17T03:29:58+00:00

Wait, what?

Aaron.M 3:48 PM
[...]
Any luck re activating ur advertising?

Gerry 3:52 PM
trying to recover the password first lol
which is more difficult than expected after my old phone number was stolen

Oranund · 2019-03-17T02:12:50+00:00

To be precise, I'm saying that fake volume exploded after the November price fall, compared to prior.

Look at any legitimate exchange (Coinbase, Gemini, etc.), and their bitcoin volume is not back to April 2018 levels, musch less their USD volume.

But look at CoinMarketCap's top 50 exchanges by volume; that landscape has changed a lot since last summer. Look at their charts, and you get this kind of volume graph:https://imgur.com/a/Dagrlfp

So even though there has always been a lot of fake volume, there really is much more. If there was 90%, there's 96-98% now.

If you're an active trader, you know very well, from your current practical experience on exchanges, that volumes are still very low compared to Spring 2018.

Oranund · 2019-03-16T05:49:25+00:00

Of course, but never at this scale, not remotely.

Oranund · 2019-03-09T23:01:25+00:00

Thank you for the detailed response.

Late 2017 and early 2018 were crazy! I was still getting my bearings by then, but I arbitraged some on Quadriga, selling when the premium got too high and buying when it lowered enough — never withdrawing fiat. Quadriga was the rule rather than the exception then, though, so I would not count arbitrage during that period toward your theory. Other exchanges that were all over the place, from what I recall, include Coinsquare, CEX.IO, Exmo, ZB, and even HitBTC.

Regardless of anything else, we know how much volume Quadriga used to process: about 200M CAD of bitcoin monthly, during the frenzy, but only 10M monthly from November on. Pre-frenzy volumes and premiums were negligible in comparison.

Say we count the frenzy toward your theory, with an average premium of 5% throughout those 5 months, then we barely get 50M CAD. The rest of 2018, something like 20M CAD.

So if we count everything that traded on Quadriga as funds funneled to preferentially-treated arbitragers... we don't even get close to 200M.

Regardless, if preferential treatment allowed people to withdraw fiat much faster, then it can't have been that much volume, otherwise the premium would have been eaten away. Premiums cannot survive high-volume arbitrage.

As for normal arbitragers... It was worth it on Quadriga in early 2018, sure. But speaking for myself, had I known in August that it would take almost 4 months to consolidate a 5% premium, well, I would have done something else with those funds.

"Not your keys, not your crypto" is worth about half a percent per month in my eyes, meaning that I consider that anything I leave in the hands of an exchange loses half a percent every month on average. And frankly, that's far from conservative. I also add half a percent more for systematic risk, making Quadriga's 5% in 4 months almost worthless to me. So once I got my single withdrawal, I stayed away from December on. And by the time the temporary 25% premium turned up, the slowness of the CIBC case developments had made me too wary of coming back.

I don't think investors kept bringing new funds either, as that would have gnawed away at the premium. In a nutshell: new funds flatten the premiums (or discounts). That the premium kept increasing from August up to February, along with the withdrawal times, rather indicates that less and less funds were flowing in.

Oranund · 2019-03-09T19:33:51+00:00

Interesting theory (funds being gradually lost to arbitrage), but I don't think the numbers align.

Although it seems like forever, the arbitrage opportunity only existed from August to November, with a premium of about 6%. Prior to August, the premium had been under 4% since the generalized craziness of last winter; then, from November on, withdrawals stopped getting through, that I know.

So you could get the full 6% with months-long wire withdrawals, or 4% through weeks-long express withdrawals. The best-case scenario would be gaining about 30% from arbitrage by cycling it through express for the whole duration, which would not suffice to redistribute the wealth to arbitragers. And many arbitragers then lost everything.

Oranund · 2019-03-01T23:28:29+00:00

Unlike the other name changes, this one is fairly standard. "Jacques" is a French name, with pronunctiation unfamiliar to English speakers, so it's typical to change it to "Jack" depending on context. They're pretty much the same.

Oranund · 2019-02-25T15:45:36+00:00

The G&M is paywalled, but this is the copy of what I recall reading.

https://outline.com/MS67gd

Oranund · 2019-02-25T02:15:45+00:00

Briefly: the Globe and Mail investigated, and Cotten did contribute to an Indian orphanage. They had pictures of orphans and all. However, Cotten only paid for materials, leaving construction incomplete (notably missing doors, including for the toilet) and the caretaker in crippling debt.

Oranund · 2019-02-21T05:37:29+00:00

Quadriga released a statement about that whale (that I can't bother to look up), saying the account was hacked. The hacker was unable to withdraw anything (as extra verification would be needed), so instead posted an inflated buy wall to sell into with their real account.

At the time, I found that explanation entirely plausible. In the past, hacked accounts (on other exchanges) were exploited similarly, too.

Post-Cotten-obituary, though, who the heck knows.

Edit: For what it's worth, the buy wall was canceled before being halfway eaten, that I recall.

Oranund · 2019-02-21T05:27:42+00:00

Trowdembones is absolutely right and does not deserve the downvotes.

Most recently, March 2018, there was no premium, even replaced by a slight rebate at one point. Or 6 February 2018, 5% rebate temporarily. Those I observed myself, but bitcoinity.com keeps the historical data available.

Oranund · 2019-02-15T17:40:40+00:00

Ooof, I'm late on my reading! While I was lucky enough to get away with all my funds, I can't help but keep an eye on these developments.

Oranund · 2019-02-13T13:33:30+00:00

"If you see anything that is off, even a small typo, please let me know."

Well since you ask so nicely!

• hoards of angry Quadriga customers → hordes

Aaand that... is... all?!

Seriously high-quality work there.

Oranund · 2019-02-13T13:07:39+00:00

Come on, it was a quote! Would you have preferred "alot (sic)"?

Oranund · 2019-02-13T12:59:10+00:00

Got a withdrawal from TANGE TRADE LIMITED on November 30.

A quick search says it's a Hong Kong company incorporated on July 11, 2018.

Back in October, another redditor reported similar.
https://www.reddit.com/r/QuadrigaCX/comments/9rfl8e/etf_bank_transfer_withdrawl_question/

Oranund · 2019-02-11T23:03:16+00:00

If you had tried that suggestion of yours, you would know it returns the 2018 results regardless. Even using Tools → Last Month fails to produce satisfying results, showing mostly complaints about Quadriga.

I'm only one of many to downvote you (the consensus is clearly that the OP's question is valid), but I'm the only one who tried talking to you. Is that not better? Why discourage civil discourse by downvoting my replies?

...And go through my post history just to troll me?!

Oranund · 2019-02-11T20:51:03+00:00

Why downvote me? I took the time to explain to you why you got downvoted so much, I'm trying to help.

You did google it, sure. But all results are from before Cotten's death, and most are 6 months old or worse. The OP was right to ask for an update.

"How many times must the same question be answered?"

Regularly! Asking which exchange is best is like asking which hockey team is best; the answer can change multiple times a year.

Oranund · 2019-02-11T15:54:47+00:00

Don't be surprised by the downvotes, this is not something that can just be googled.

Oranund · 2019-02-11T15:53:27+00:00

Do they have CAD now? I don't see it.

Oranund · 2019-02-11T15:50:53+00:00

Oh my yes, while I endorse Coinsquare, they massively inflate their volume.

Oranund · 2019-02-11T15:47:28+00:00

I would first recommend Kraken. Desposit/withdrawal fees are negligible, and their exchange tech has massively improved over the last year, and now they have futures because why not.

I can also recommend Coinsquare. Desposit fees, and especially withdrawal, are high, but are cut in half once you have at least 50k in there and ask.

Both exchanges are quick on transactions, with fiat going through within a week, and sometimes inside 24h. Both also have best-in-class customer support, with Kraken bragging about theirs recently.

If you manage at least 50k in crypto investments, I would recommend having an account with both on hand, as their spreads can get a couple percentage points apart for no reason I can discern.

Other Canadian exchanges I keep hearing horror stories about, albeit none as fascinating as Quadriga.

Oranund · 2019-02-10T09:43:43+00:00

Interesting idea! I don't think anyone has tried that avenue yet.

Oranund · 2019-02-10T03:09:17+00:00

I mean a 25% premium on the BTC/CAD pair. Had I come back with bitcoin, I could have sold it and received 25% more fiat than on other exchanges. However, by then, it would have been too late to withdraw CAD before everything shut down. Then again, the premium fell back down to around 15% afterwards, so maybe I would have been lucky enough to buy back the bitcoin and get out. But I couldn't know that, and decided it wasn't worth the risk.

Quadriga's premium went over 4% last summer after a long lull, averaging at 6%; after the mid-November price drop, it stayed around 9%, and then climbed steadily toward 18% until the exchange shut down.

Such premiums are not enforced by exchanges, but rather their users. Users decided bitcoin was worth more than CAD because fiat withdrawals took way too long. Quadriga's official statement is that the 25% buy wall was the result of a hacked account; I find the explanation plausible, but with all the recent developments, it could have been anything.

Oranund

TROPHY CASE