 Hi everyone, my name is Giovanni and today we're gonna talk about a big problem in the crypto space, fake trading volumes. Last week, index fund provider Bitwise claimed that about 95% of Bitcoin exchange trading volume listed on CoinMarketCap.com is actually fake. That means that out of the $11 billion reported volume on CoinMarketCap, only around $270 million is real. Apparently, a number of unregulated or poorly regulated exchanges have been faking their volumes so to appear high in the rankings. Attract more traders on their platform and charge high fees to customers who want to list their coins on the exchanges. Just to remind you, CoinMarketCap is among the 500 top visited websites in the world and that's why it has a huge impact on the market and on traders' decisions. So no wonder CoinMarketCap has been criticized for failing to list exchanges that are suspected of washed trading and market manipulation. The good thing is that this time CoinMarketCap acknowledged the problem and announced it will implement some new features in order to improve transparency on their website. We asked CoinMarketCap what measures will be taken exactly and they replied in an email saying that the best way to mitigate the issue is to over-provide on data and let users make their own informed choices about what to do with that data. Among the additional information that they plan to integrate will be liquidity measures, cold and hot wallet balances and traffic data. So the fake volume report published by Bitwise shows similar results to previous ones, like the one published by Crypto Integrity and Crypto Trading Platform, the TAI. We reached out to Joshua Frank, co-founder at the TAI, and asked him about their own report on fake volumes. So Joshua, can you tell us a bit about the methodology you use to detect fake trading? Yeah, I think that generally the conclusions that everybody came to were pretty similar. I think it was a lot of the same exchanges. So if you take, for example, our methodology, which was really looking at exchanges reported trading volume versus website viewership from a company called SimilarWeb, the original purpose of the research was actually an internal project that we were doing. We were working on refining our pricing feed and our site. And when we were doing that, we were thinking internally, hey, how do we make sure that we're only showing prices on exchanges that have liquidity? So when we began doing it, we just made our own internal spreadsheet and we were like, what is the best way to identify whether or not an exchange has liquidity? And we were like a pretty quick way to do it is to just compare the viewership that some of these sites have versus what they're reporting as their trading volume. And what we found very quickly was it just didn't make any sense. So for example, some of these exchanges, for each view they had, were reporting $50 in trading volume while others were reporting $400,000 in trading volume. And we were very quickly just like, this just doesn't make sense, right? How could it be that one exchange has $50 in volume per every user that comes to the site, another one has $400,000 in volume? So we basically just made it into an Excel spreadsheet, moved it to Google Drives that other people could have access to it, and decided to make all the data available so that people could draw their own conclusions. One example or something that we did was we took the weighted average trading volume between some of the major exchanges and some of the exchanges that we identified as being real players in the market and basically created that as a basis for comparing other exchanges. And we found that between those exchanges, there were $500 in some dollars in trading volume averaging out per website visit and use that as kind of a comparable for the other exchanges. And as a result, we found that about 87% of volume seemed to potentially be suspicious or inflated, and that really kind of coincided with a lot of the research that other places have done. And what I found is a lot of the exchanges actually want to be more transparent with us, and they want us to kind of verify or validate that what they're doing is real, which is something that's been interesting as well as kind of a validation that a lot of what we reported out is kind of real because a lot of the exchanges that we said had more suspect or questionable volume haven't been reaching out in the same capacity at all. Ah, that's interesting. So what would be your tips to help traders detect fake trading volumes? One interesting way to do it just as a start is we put out a free Google Sheet, which you can track on our Twitter account. It's available there. And that shows just the website viewership compared to trading volume. And I think it's a good starting place, right? If you see it in exchange, that's reporting $400,000 in trading volume per view. It's probably not occurring. That's probably not real. That's an interesting way to do it. Also, look at the trade history. If you see that the trade history is 3, 4, 5, 6, 7 Bitcoin being traded at a time, that's not happening. People aren't... The average trade size on a lot of these exchanges isn't $20,000, $30,000 a trade. Go look at an order book of an exchange that you think is real, an exchange that we identified not having suspect volume. You'll see that a lot of the trade sizes are 0.1, 0.2, Bitcoin, or whatever the trading pair is. They're much smaller. They're different. That's a good way to look at it. Thank you, Joshua. Actually, not all exchanges have dubious volumes. The reports pointed to a number of regulated exchanges that proved to be clean. One of them is Binance, among the biggest exchanges in the world. We reached out to CZ, CEO at Binance, to ask him what he thinks of this issue. So, CZ, what do you think is the main takeaway we can get from these reports? From our perspective, I think most of the same conclusions you saw was that the Binance trading volume is very solid. It's very real. So, I think basically in the industry, the more reports like this, the better. The more transparency, the more data there is, the better. It's not so much CoinMarketCap's fault, but everyone tries to blame on them. But CoinMarketCap is a very simple reporting mechanism where every exchange reports their own data to them and they just show it. On Twitter, some people blamed you for not taking a strong enough stance on this issue. What role, if any, should Binance play in all this? I think we do have a role to play, but I don't like the way people assume how we should behave and not behave. Especially, people assume that we should have a fight with CoinMarketCap on Twitter. That's just not what we do. So, we do work very closely with the CoinMarketCap guys and we know the team quite well. And we collectively all want to solve this issue. It's not like we're not working on it. But just calling and saying, like, hey, I think you should work a bit harder and you should pick a fight with these other guys, with your friends on Twitter. I mean, that's kind of childish. So, I don't like that. But I think in general, we do have a role to play. And number one, I think as all the reports have shown, Binance is a very solid volume exchange. So, number one, we don't exhibit any bad behaviors. We do try to encourage transparency in the industry. One of the other things we cannot really do very well is as an exchange, we can't really be attacking the other exchanges. I think that's actually negative for the industry overall. So, in your opinion, how can CoinMarketCap solve this issue? We give a number of people a number of ideas. For example, most exchanges depend on CoinMarketCap to give them referral traffic to a very large extent. And if they have any penalties by, say, for example, delisting the exchange from their site for a period of time, I think that would have a lot of pressure on the exchanges. But whether to do it or not and how they would do it is really up to them. Because a lot of the concepts are very simple, but when you actually come down to implementations, it's actually very tricky. It's the same thing. Like when we delist a project from our trading site, the projects fight back and they will go on social media, complain and raise a bunch of... So it hurts both ways. So it's not a simple problem to solve, but I think as an industry, we do need to work hard to solve this problem, which is to increase transparency, have real data, real volumes, etc. Thanks a lot, Sizi. We also hope that with more and more legit players like Binance taking the lead, the crypto space will become more transparent and safer for everyone. So guys, what do you think? How much responsibility should CoinMarketCap take for fake trading volumes? Let us know in the comments. Thanks for watching and don't forget to subscribe to our channel for more exclusive content.