in this article of QuantVan blog ” Fake orders : is AlgoTrading a solution? we want to take a look at fake orders and volumes on exchange and see that AlgoTrading can be an answer to this issue or not!
Fake orders and Volumes on Most Major Cryptocurrency Exchanges
there is a method calling “slippage” that created by Ribes that aims to test the order book of each cryptocurrency trading pair.
The slippage method by tests the liquidity of digital assets selling $50,000 worth of each asset across various exchanges.
Bitfinex, Kraken, and GDAX are regulated cryptocurrency exchanges that allow cryptocurrency-to-fiat trading. GDAX has more than 20 mln users and the most widely utilized Bitcoin wallet. Kraken is based in San Francisco, while Bitfinex is based in Hong Kong, alongside OKEx and Huobi.
Kraken and GDAX, which mostly utilized by users to process cryptocurrency-to-fiat trades, deposits, and withdrawals,
recorded the smallest slippages, signaling that the two exchanges have sufficient liquidity to deal with relatively large sell-offs, in the range of $50,000 to $100,000.
volumes and price are easy to change
In trading platforms with inflated volumes, it is somehow easy to manipulate the price of small cryptocurrencies. While it takes many big factors to bring down the price of major cryptocurrencies like Bitcoin and Ethereum, …
Ribes’ research shows that a similar result can achieved in a market with small cryptocurrencies with capital in the range of $50,000 to $100,000.
The cryptocurrency industry is still at its early stage, and digital assets remain highly volatile.
Inflated and fabricated trading volumes on major cryptocurrency exchanges need to be highlighted and acknowledged,
in order to obtain a better visualization of actual liquidity within the cryptocurrency market.
‘Fake Volume’ and Thin Order Books ?
TFM exchanges have been the subject of much controversy. The report shows that TFM exchanges tend to have the thinnest order books and lowest visitor-to-volume ratios.
Despite the data that presented in this report, which says that TFM exchanges have ‘fake volume’ is tricky and as its definition is highly subjective.
The structures implanted on these exchanges certainly inflate trading volumes,
and offer poor liquidity as evidenced by their thin order books making the exchanges less stable.
But TFM exchanges considered as a threat to this industry?
CZ, Binance CEO stated in an interview about this subject:
“The volume at the exchanges that have tried that have all come down… The law of supply and demand tells us that since there’s always more platform tokens being issued; you can almost guarantee that the price will go down over time. So, the way it’s done is not correct.”
95 percent of illegal exchanges volume are fake?
According to a report of April,2019, prepared by the based digital exchange fund, about Bitwise Management, 95 percent of the volume of illegal exchange offices seem to be fake.
The study carried out that the volume of daily turnover of $ 6 billion, which observed in different markets, is unreal and fake.
Bitwise claims that close to 95 % of the reported volume of exchanges is fake.
and in the real Bitcoin market of the daily trading volume is about 273 million, which is much smaller, more organized and more legal than what is seems like.
suspicious signs include variable and unapproved patterns of purchase orders, lack of transaction in which the decimal numbers considered or have low – value.
suspicious exchanges reflect the volume of stability trading over 24 hours,
while the trading volume in the legislative exchange varies according to waking hours and sleep hours.
Algorithmic Trading Platform Made their Way to The Cryptocurrency Market
let’s get back to our issue, Fake orders : is AlgoTrading a solution?
Automation is taking up the world in 21st century and following this fact algorithmic trading has become the means of trading for more than 75% of all trades made on global stock market.
Cryptocurrency market, on the other hand, while becoming an attention-grabbing platform for more and more investors, both retail and institutional, is lacking tools for algorithmic trading and other innovations as such. Following earlier transformations in traditional asset classes we face a transition of trading decisions in crypto to trading bots of which a few attempts have been made toward anything more complex as machine learning based trading.
with all we understand from fake orders and trading volumes,
there are some companies that create algorithms that in which they can put an end to fake orders.
Also provide orderbook level price data from various exchanges.
to know the fake orders and figuring out that AlgoTrading is a solution, you must search alot and always make yourself aware in this field
You can simply find this companies and gain information of what they do exactly and what benefits they bring for you when it comes about algorithmic trading.
QuantVan also have its own place beyond these companies,
which is a platform where developers and traders seeking algorithmic cryptocurrency trading,
find solutions to their key challenges.
Development environment and data pipeline that this platform comes up with.
If you have any interests as a traders and you do care about having the right algo trading,
it’s a good chance to find what you are looking for.
with simple searching and learning more about related companies such as QuantVan.