Nomics Releases Transparency Report for Cryptocurrency Exchanges

Last month, BitWise released a report claiming that most of the volume in the cryptocurrency market was falsified. Starting from this bombshell report, Nomics asked another question: How many of the verifiably ‘good’ exchanges are truly transparent? As it turns out, the ‘trusted’ exchanges also generally provided historical trade-level data. The only notable exceptions were Bittrex and itBit.

16/ Congrats to @hitbtc, @binance, @bithumb, @CoinbasePro, @bitfinex, @krakenfx, @gate_io, @Bitstamp, @gemini, @Poloniex, @bitFlyer, @Aurora_dao, @ZEBITEX, @wcx, and @Blocktradecom on having a Transparency Rating of A on Nomics.https://t.co/EvLNfncCDD pic.twitter.com/sIsDS3HgNK

— Clay Collins (@ClayCollins) April 16, 2019

The conclusion, after all, makes sense. Those exchanges who have legitimate volume want to attract more market-makers and broader discovery. They thus have an incentive to provide full trading data and history for their customers.

Some Criticisms of the BitWise Report

Although the new transparency analysis put out by Nomics operated on the ideas put forward by BitWise, Nomics co-founder Clay Collins had some criticisms of the original BitWise report. Here are some of the more contestable points:

1. Collins claims the report has been far too over-extrapolated. A study on Bitcoin (BTC) pairs has somehow been extended to apply to all cryptocurrency pairs, which he says is not correct.
2. Collins points out, the conclusions are apparently not falsifiable.
3. He argues that the report has an inherent bias because it was used to persuade the SEC to allow for BitWise’s Bitcoin ETF.
4. The study’s overgeneralization has been unfair to honest exchanges. Some ‘good’ exchanges may have had a bad day and experienced a significant amount of wash trading when the study took place and vice-versa.
5. Lastly, he says that the BitWise study lacked a clear timeframe.

14/ Critique #7: The public’s overgeneralization of the report's findings are unfair to upstanding exchanges. Exchanges like @ShapeShift_io & @Aurora_dao have gone out of their way to comply w/ regulators & in ShapeShift’s case, have experienced layoffs as a result.

— Clay Collins (@ClayCollins) April 16, 2019

Although the Nomics report received a decent bit of traffic online, Collins’ comments criticizing the BitWise report fell flat. This was largely because his criticisms seem to be more like sour grapes than legitimate, especially the comical claim that a ‘good exchange’ might have had a ‘bad’ wash trading day. For example, one could argue that it is perfectly fair to extrapolate general cryptocurrency market conditions based on an assessment of the legitimate volume for BTC pairs. This is simply because BTC leads the market. If trading on BTC pairs is fake, it is almost certain this is the case across the entire market. Secondly, this study has been conducted before by Bloomberg, so the idea is nothing new. In fact, studies have shown this same conclusion repeatedly demonstrates the results can be empirically substantiated. Additionally, if BitWise made the report for the SEC to be honest about market conditions, it seems perfectly fair game. In fact, that’s a positive incentive if anything, rather than a criticism. So, although the Nomics report has some merit, Collins’ own comments on the BitWise report should raise eyebrows. Do you agree with the conclusions put forward by Nomics? Let us know your thoughts in the comments below.