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Binance may be Wash Trading?

Damning statistics from yesterday’s (October 23rd) trading appears to show Binance, the world’s largest exchange, partaking in wash trading. 

The past month or so has been a volatile time for Bitcoin’s price and as such the trading volumes. Bitcoin has fallen dramatically, most notably on the 25th of September and there was another drop in price on October 23rd at around 12:40pm UTC.

With volatile markets like this, exchanges usually see a reflection of this in their statistics. For example, OkEx saw its BTC spot price decline by 5% within the initial 4 minutes session on October 23rd and the quarterly Futures contract, dumped by 6.2% during the same time window. 

OkEx was not special in terms of these dumps, most other derivative exchanges like Huobi and Bitmex also saw similar statistics. However, Binance, an exchange known for spot trading, did not see a similar drop. 

Binance had an insurance fund over 10mn USD (as of 23 Oct 2019) and their latest daily trading volume passed 0.8bn USD. Now Changpeng Zhao and other Binance supporters may say that their strategy and a bit of luck could set them apart from the other exchanges. However, a closer look at their data in comparison to other major exchanges reveals some potentially damning evidence. 

The evidence

As previously mentioned, exchanges usually see a shift in trading volume when the market is volatile. As the figures show below, OkEx, Bitmex and Huobis trading figures for the price drop on the 25th September and 23rd October illustrate this.

OkEx

Bitmex 

Huobi 

However, Binance figures for the dates of Bitcoin price drops the trading differential is not as stark. This is most noticeable on the October 23rd date. 

Binance 

Certainly this is a little troubling, especially when you consider that one plausible reason for this is wash trading. The evidence only increases when you look at the data for a 4 hour period.

Bitmex

Huobi

OkEx 

As you can see the statistic in terms of Bitcoin traded remains largely similar between Bitmex (30K-100K), Huobi (20K-70K) and OkEx (20K-80K). Yet for Binance it is eerily stable and is much lower, staying at just 5K. The pattern is also different to the other three exchanges. Coincidence? I think not. 

Bitmex

The damning statistics don’t end there, a closer look at order book depth also reveals some issues. As the figure below shows, BitMex had a quote size around 100 BTC on average ( [bid size + ask size] / 2), OKEx around 60 BTC while Binance was merely less than 2.5 BTC. 

Yet peculiarly, when OkEx and Binances futures trading volume was looked at, Binance had the greater amount. How can their order book be less, but their trading volume higher? For many this would be a clear indication that Binance had washed some trading off the books. 

Okex

Binance

Conclusion

I suppose we will have to wait and see what the Blockchain transparency institute (BTI), the one who listed a number of exchanges but not Binance have to say about this matter. Although, their track record is less than perfect too, with undeclared funding and dubious research, so you shouldn’t hold your breath on any clear or trustworthy response. 

Elina is New York based writer and media consultant. Currently she is involved as an advisor in several ICOs. In addition to her professional interests, she loves jazz, modern art, coffee, and yoga.

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