[2019-11-13] Crypto Space Has Shockingly Low Total Liquidity of $500 Million

[gentlemand]

https://cryptoiq.co/the-crypto-space-has-shockingly-low-total-liquidity-of-500-million-or-less-and-numerous-top-exchanges-caught-faking-their-volume/

It's extremely silly measuring liquidity entirely by what's on order books, plenty more will be sitting on the sidelines. Also with things as comatose as they've become it won't bear any resemblance to the more muscular periods of time.

All the same there are some pretty comical figures such as - Bibox that has volume of $1.05 billion and liquidity of $300,000, ZB that has volume of $483 million and liquidity of $310,000.

I will guess that the real figures for most of the exchanges clogging up the scene probably require another two zeroes removing, or just a good old zero.

[buwaytress]

Why is that shocking? Think the entire ICO space in 2018 sort of knew this, which is why almost every other "solution" was about liquidity. Which is why exchange listing is such a big sub industry in itself, which is also why DEXs gained momentum (though still never to the level I had really hoped they would be).

Not really much of a concern for non-serious traders though. People who need things to happen don't really care about orderbooks and go OTC, maybe even staggered p2p as a last resort.

[DooMAD]

Fake volume has always been a thing the entire time I've been involved in crypto.  Not only is it nothing new, but it's not even unique to crypto.  Fiat businesses try to pad their numbers where they can, so it looks good for investors.  Companies about to float on the stock market often have giveaways, or two-for-one deals, basically whatever special offers they can get away with so they can give the impression they're moving a greater amount of products than they normally would be.  Anything to pump up the numbers. 

The only differences in crypto are that it's easier to obfuscate and manipulate figures due to pseudonymity and there are currently fewer regulations to adhere to.

[gentlemand]

Fake volume has always been a thing the entire time I've been involved in crypto. 

There's definitely been an explosion in laughable junk in recent times. Back in the day you could never quite be sure. Now it's there out in the open. Witness those exchanges with trillions in volume but $4 on the buy side yet the trades magically happen just above it.

It's good that CMC are starting to do something about it. Shame that they got powerful enough for it to become a problem.

[DooMAD]

Back in the day you could never quite be sure. Now it's there out in the open. Witness those exchanges with trillions in volume but $4 on the buy side yet the trades magically happen just above it.

Perhaps it wasn't 100% clear-cut, but it was close enough for me to be convinced.  See this CoinDesk article from back in 2013 as an example.  In particular, this section:

In his article posted on 20th December on Xueqiu, one of China’s most popular investors’ social media platforms, Shi claims that in a two-hour period on 19th December, OKCoin’s data indicates that over 30,000 BTC changed hands.

However, by comparing the number with the tally of selling and buying orders that were displayed separately, Shi concluded that the real transaction volume could be as low as one tenth of what the company purported to exchange.

[gentlemand]

Perhaps it wasn't 100% clear-cut, but it was close enough for me to be convinced.  See this CoinDesk article from back in 2013.  In particular, this section:

At least the Chinese did a more convincing job of it than the current crop, but I well remember the occasional moment when their bots stopped stoking it and their exchanges died instantly. Even if there were some real people as well it was nothing but zero fee froth.

I could never get over how mindless the press were in eulogising China's trading 'dominance' when it could be debunked with twenty seconds of research. The death of those exchanges is probably the biggest factor in the price being set free. For some reason the West would run screaming every time those 3-4 Chinese teenagers dumped on them.

[figmentofmyass]

Perhaps it wasn't 100% clear-cut, but it was close enough for me to be convinced.  See this CoinDesk article from back in 2013.  In particular, this section:

At least the Chinese did a more convincing job of it than the current crop

huobi and okcoin were no more convincing than today's crop. people used to refer to their volume churning as "the volumizer" and everyone knew it was completely fake. on some days they did volume well into the millions of BTC on a single exchange. nobody bought that shit for a second lol. if you zoom out on the old bitcoinwisdom charts it's incredibly obvious when the volumizer was turned on and off:

[gentlemand]

huobi and okcoin were no more convincing than today's crop. people used to refer to their volume churning as "the volumizer" and everyone knew it was completely fake.

The difference is that we all knew it was zero fee so it's quite possible real people were participating in the churn a decent proportion of the time. It's rather different from many of the places now with a $10 order book and $50 million in volume fizzing away 1 cent above it.

I'm not even sure some of them permit real people to get on to those markets. Someone who wants to cash in to buy their coffee could completely crash them.

[Swordsoffreedom]

Perhaps it wasn't 100% clear-cut, but it was close enough for me to be convinced.  See this CoinDesk article from back in 2013.  In particular, this section:

At least the Chinese did a more convincing job of it than the current crop

huobi and okcoin were no more convincing than today's crop. people used to refer to their volume churning as "the volumizer" and everyone knew it was completely fake. on some days they did volume well into the millions of BTC on a single exchange. nobody bought that shit for a second lol. if you zoom out on the old bitcoinwisdom charts it's incredibly obvious when the volumizer was turned on and off:

Does this mean that the entire 2017 bull run was consequence of fake volume? The wild upward trend coincides with suspiciously high volume which was fake if that's what you're saying?

[gentlemand]

Does this mean that the entire 2017 bull run was consequence of fake volume? The wild upward trend coincides with suspiciously high volume which was fake if that's what you're saying?

I think it's quite possible all of these bull runs started off with some fakery. But then real people take over. There's no way 2017 finished up fake. Witness all of the exchanges buckling, some turning away new custom, nutters and ads all over Youtube. None of that can be faked.

In 2013 people were taking out loans and selling their children in just the same way near the end.

It is a little strange how in recent times the start of these price explosions coincided with Bitfinex having problems. Same goes for Gox back in the day.

[hello_good_sir]

Jesus... I always knew some of the numbers that were brought up by companies like ZW, BMW, and some other exchanges were likely fake, but I didn't know the statistics where this exaggerated.

It seems like the majority of the exchanges that are looking to fake their volume have a goal of creating insane profits off IEOs, and often at times, they would buy up the IEO's tokens themselves, or pump the market right after, so all of the IEO's held on their platform would be classified as successful.

[figmentofmyass]

Does this mean that the entire 2017 bull run was consequence of fake volume? The wild upward trend coincides with suspiciously high volume which was fake if that's what you're saying?

on the contrary, the 2017 bubble took off after the chinese exchanges turned off the volumizer bots. they did so because the government was investigating them.

the chart actually makes it look like the fake volume was keeping a lid on the price throughout 2016. probably just a coincidence though.

[gentlemand]

the chart actually makes it look like the fake volume was keeping a lid on the price throughout 2016. probably just a coincidence though.

It looked to me like since the 2013 bubble the West would build up the price, the Chinese casinos would poo on it and the West would run crying for mummy until they felt brave enough to do the same thing again. It seemed to happen like clockwork.

As soon as China was gone things seemed to loosen up massively.

[webtricks]

My question is what liquidity are we talking about? Is it crypto/crypto or crypto/fiat or total of both? The story changes entirely depending upon the basis on which liquidity is calculated.

The article signifies the new Liquidity option launched by CoinMarketCap (looks more like a PR article to me). But CoinMarketCap is only considering crypto/crypto pairs to determine 'Liquidity'. I don't think term liquidity is meant for the crypto/crypto volume. Liquidity should be used to determine how easily can one convert fiat money like USD or Pound to Cryptocurrency and such markets should be considered for determining liquidity. Proper title for this CoinMarketCap addition should be like 'Non-manipulated Volume' or 'Real Volume'.

[gentlemand]

I think liquidity should be universal.

There are no shortage of alts with truly pitiful levels of liquidity in BTC so people should be informed of that too.

I guess this article has settled on the USD as most outsiders only look at the ways in or out of the whole thing but it's equally relevent elsewhere.

[1Referee]

Liquidity should be used to determine how easily can one convert fiat money like USD or Pound to Cryptocurrency and such markets should be considered for determining liquidity. Proper title for this CoinMarketCap addition should be like 'Non-manipulated Volume' or 'Real Volume'.

Fair point.

I prefer to focus on https://messari.io/screener for volume. It's obviously not a guatantee that these volumes are 100% real, but at least they are far more realistic considering the exchanges (Binance, Bitfinex, Bitflyer, Bitstamp, Bittrex, Coinbase Pro, Gemini, itBit, Kraken, and Poloniex) they fetch the data from. The difference between the volumes here and the volumes shown on CMC is massive.

I have been following the volumes at messari and they have consistently dropped in the last months. Not so long ago the daily volume on messari for Bitcoin fell below $100 million, which is an absolute joke. CMC kept reporting double digit billion $ volumes. They don't even care about fake volumes anymore despite their 'promise' for drastic changes.

[figmentofmyass]

I have been following the volumes at messari and they have consistently dropped in the last months. Not so long ago the daily volume on messari for Bitcoin fell below $100 million, which is an absolute joke.

that's what happens during consolidations. it's especially obvious in triangles---volume is totally dead by the end. that's one of the reasons i'm pretty sure $7296 was the bottom even though things look a little grim right now. that push to $10.5k was done on massive volume, the biggest since the june top.

[webtricks]

I have been following the volumes at messari and they have consistently dropped in the last months. Not so long ago the daily volume on messari for Bitcoin fell below $100 million, which is an absolute joke. CMC kept reporting double digit billion $ volumes. They don't even care about fake volumes anymore despite their 'promise' for drastic changes.

We all know more than 90% altcoins are joke. Suppose I have 500K Waves which worth around $350K in present market. CMC says market volume is $11M which means me selling 500K WAVES shouldn't have much effect on the market price because it's just 3% of the market volume. But dare I sell those 500K WAVES and believe me market will crash like hell, it is possible that market price of Waves will fall below $0.40 from present $0.75

I stopped believing alts all together now, these are joke. It's better to stick with Bitcoin and work for the development of Bitcoin as universally accepted currency/asset rather than trying to make profits out of shitcoins having no real value and utility.

[sikke]

Do they have any idea what actual liquidity means?

Simply put, not all liquidity is put on orderbooks, as you say. What is a much better measurement is how much demand there is at a particular point, regardless of whether or not that demand is reflected on orderbooks of exchanges.

A simple example would be OTC trades, or P2P traders. Both of them are prominent components that contribute to BTC's liquidity, yet they don't show up on any exchange's orderbooks by nature.

[Theb]

If you pattern it out with the traditional stock brokers we have as compared to crypto exchanges you will see that crypto exchanges aren't that different at all. You see stock brokers even though they handle huge deals in the stock market aren't that liquid at all but what happens is they can still manage to handle big withdrawals as they themselves have other assets to liquidate when that happens. And isn't it obvious why we have limits built into our accounts? It's not just to limit our trades but also our withdrawals from the exchanges these prevents sudden liquidity problems. Their worst possible scenario is something that we don't have to worry about since they can still manage with them also holding moving assets around.