Crypto Diaries: EOS tops ratings, Exchange hacks & Fake Volume

3 min read

The Crypto dashboard looked healthy & green today as most of the digital assets recorded  healthy gains. The digital kingpin Bitcoin (BTC) has been hugging the $4K level quite strongly as it continues to trade in the familiar range. BTC has looked healthy despite the fact that Chicago Board Options Exchange (CBOE) decided not to add new bitcoin futures for the month of March. After an initial knee jerk reaction making a low on some volatility Bitcoin turned positive hitting a high of in the $4160 range, but this was almost two weeks ago. The discontinuation of the BTC futures by CBOE turned out to be a whimper considering the big splash it had made when they were introduced back in December 2017 – perhaps due to the maturing of the market with its competitor, the Chicago Mercantile Exchange (CME), deciding not to take any such action and also the investors looking to other avenues of investment like the physical bitcoin futures to be introduced by Bakkt. Let’s move on to some the other interesting stories in the Cryptoverse.

EOS at the top

Originally dubbed as the “Ethereum killer” and one of the members of the Top 5 Crypto club, EOS has remained one of the resilient projects despite all the controversy surrounding its governance model (apparent lack of decentralization), ever since it launched its main net in the middle of 2018. EOS was presented as an ambitious project in Consensus 2017 by its developers with the intention of creating a completely decentralized application platform addressing the scalability issue. Apart from raising a record-breaking more than $4 billion, EOS has consistently ranked at the top of the Crypto rankings & this month was no exception. It has been turning at the top of the official Chinese official Crypto rankings (below) which generally favor home-grown projects, but when a western financial rating agency like Weiss (above) comes out with the same conclusion, it is pretty evident that the project has some substance to it. Time will tell if EOS can put all the controversies around the project to rest & successfully challenge Ethereum to become the ‘backbone of the new internet.’

Helped by favorable reviews by the rating agencies & the general health of the most recent Crypto market, EOS jumped more than 15% in the past couple of days alone challenging weekly highs in $4.40-$4.60 region, a significant level on the daily chart as well. A penetration of this level could signal a Medium-term trend reversal. A bigger follow through in the general market would be needed though to push it through this level. For now, EOS remains the 4th largest digital asset with a market cap of $3.82 billion at the time of writing.

Exchange hacks & lack of due diligence

There have been instances of major crypto exchanges getting hacked in previous years but the beefing up of security around their networks, increased due diligence & regulatory oversight has led the hackers to target smaller players like New Zealand based Cryptopia, Singapore based DragonEx & now reportedly Coinbene. Goes to show that investors should not choose convenience & speed over reliability and due diligence when choosing a Crypto trading platform. According to a global study by Coinfirm for 216 Crypto exchanges, the industry is far less compliant than it seems. The study found that 69% of the businesses did not have transparent KYC procedures in place, while only 26% of the Crypto exchanges followed a high level AML compliance.

The report was especially critical of one of the biggest exchanges, Binance, due to the anonymous activity – where transactions of less than 2 bitcoins did not require KYC compliance as of Feb. 2019, which is a huge red flag for the regulators. Also restricted country users of the exchange could easily access the platform by simply using a VPN. Others exchanges like Coinsquare, Coinbase, Gemini and the Circle-owned Poloniex were identified as low-risk being licensed & following strict KYC/AML guidelines. In a similar move Kraken announced the mandatory enabling of the 2-Factor authentication for all its users, announced in a post recently to adhere to strict industry & security standards.

Fake Volume inflates Crypto Exchanges’ ego

Recently you might have heard the news of lesser-known digital exchanges LBank and Bit-Z took over Binance on adjusted trade volume Crypto exchange rankings on CoinMarketCap (CMC). There is a one problem though – while CMC claims to clear artificial volume & wash trading, two recent reports contradict this claim. The reports support the fake volume thesis since CMC mostly goes by the volume reported by Crypto exchanges themselves.

The first report was by Cryptocurrency index fund provider Bitwise Asset Management who sourced their data from the widely acclaimed CMC – while sharing their findings with the U.S SEC (Securities Exchange Commission),  Bitwise claimed 95% of the reported volume by the unregulated crypto exchanges is fake. The other report was from the Crypto Analytics firm the Tie – the study conducted on some 97 crypto exchanges concluded that 87% of reported volume does not even exist. The horn on fake volume was sounded by the Blockchain Transparency Institute last December when they reported more than 70% of the reported volume on the Top 10 exchanges listed on CMC to be non-existent. In some cases it was less than 1%. BTI basis its analysis (figure above) on a continuous evolving methodology based on specialized metrics available for further study on their website.  If these studies are to be believed, the market cap size of the Cryptos is should be significantly lower than being reported. What do you think?

Until next time… stay tuned!

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Faisal Khan Faisal is based in Canada with a background in Finance/Economics & Computers. He has been actively trading FOREX for the past 11 years. Faisal is also an active Stocks trader with a passion for everything Crypto. His enthusiasm & interest in learning new technologies has turned him into an avid Crypto/Blockchain & Fintech enthusiast. Currently working for a Mobile platform called Tradelike as the Senior Technical Analyst. His interest for writing has stayed with him all his life ever since started the first Internet magazine of Pakistan in 1998. He blogs regularly on Financial markets, trading strategies & Cryptocurrencies. Loves to travel.

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