Chainalysis and New Year Stories: Wrong report on fake volumes, confirming cryptocurrencies bubble is over

By Selena On Jan 2, 2020

Pump and dump schemes, fake volumes, or wash trading are what often happens in the cryptocurrency market. If you believe in transparent reports that these behaviors are gradually decreasing in the market, you are wrong! Reports from Bitwise Asset Management, The Tie, and the Blockchain Transparency Institute have exposed Chainalysis’s misleading parameters about “clean” exchanges in the market. Also the wrong report on fake volumes of Chainalysis.

ICYMI: See how we can use on-chain data to determine which exchanges are likely faking trade volumes. https://t.co/WywmlLhfGA

— Chainalysis (@chainalysis) November 18, 2019

Chainalysis claims contrary to reports, and fake volumes went down in 2019

The performance of cryptocurrency exchanges is a significant concern for the cryptocurrency community. In 2019, except for unwanted hacks, it was the exchanges that are the ones who caused the problem for themselves. And perhaps the situation of “active” misjudging their trading volume also does not surprise users.

At the beginning of the year, studies by Bitwise Asset Management, The Tie, and the Blockchain Transparency Institute revealed the true nature of cryptocurrency exchanges. The report stated that more than 95% of all exchanges are forging their volumes. And this number has not decreased compared to the second report published six months later.

Moreover, Bitwise has reported that some exchanges have chosen the chart of clean exchange trading charts and began to adjust their charts to look the same. This means that the status of fake volumes in 2019 has not diminished. And Bitwise’s conclusions went against Chainalysis.

Philip Gradwell, the chief economist at Chainalysis, said:

“People will think that 2019, a year when prices rise, and institutions appear, will see bigger fake volumes, but winter of 2018 took the lead.”

Philip Gradwell, Chief Economist at Chainalysis

Besides, Gradwell also stated that when analyzing on-chain data to study the volume of fake transactions between two years, 2018 and 2019, he realized this situation had declined.

Gradwell said:

“At Chainalysis, we used on-chain data to assess fake trading volumes and found that fake volumes declined in 2019 relative to 2018.”

Analyzing the Bitcoin price and commenting on its 92% increase, Gradwell stated that once again, the on-chain data serves as an essential source of truth about markets. Transaction fees have dropped since the price dropped, settling in the range of $ 7,000 – $ 7,300. Fees fell below $ 1 in the period near the end of November and are currently at $ 0.394.

Source: Average Fees, ByteTree

The average transaction value is now at $ 33, dropping below $ 100 per transaction in November.

Source: Total Tx Value, ByteTree

Cryptocurrencies boom and the bust bubble is now over

The cryptocurrency market is divided into two distinct stages, before 2017 and after 2017. This division appeared clearly after the price increase in December 2017. However, the 2018 bearish market wiped out all.

From the price of Bitcoin soared to $ 20,000 and dropped to $ 3,000 a year later, many people called the cryptocurrency market a bubble. However, with a stable 2019, many people have begun to retract that statement.

Gradwell said that to understand better the real value of moving on the chain and between market participants, he divided the analysis into two parts.

Source: Chainalysis

In February 2019, the dollar value deposited on the chain reached its lowest point since the start of the 2017 bull race. At the time, it should be noted that Bitcoin is at just $ 3,500, with trading volumes near the monthly lows due to the sharp decline in volatility. With the price increase at the end of March, the dollar value deposited on the chain has nearly tripled to $ 100 billion per month. This has been a remarkable event since March 2018. The increase in this chain broke the massive price of Bitcoin in April.

He concluded:

“In absolute terms, the number of transfers has increased by 35 percent in the last six months. The number of transfers has increased from 17 million per month in February 2019 to 23 million in November 2019. This is to see cryptocurrencies growing again, and a boom and bust cycle starting in 2017 has worked.”

Read more: