The Value of Bitcoin is Real But Its Trading Volume Might Be Fake
The recent report by Bitwise has created enough buzz as it disclosed that how 95% of the total trading reported for Bitcoin is nothing but fake. The most common reaction to this report expectedly saw it as yet another proof of lack of law as well as the presence of scams in the crypto industry.
Similar to these critical statistics, there were also the ones wherein the estate manager went on to describe the activity of trading on 10 genuine exchange platforms hosting just the 5% that were free from wash trades or other manipulations.
Bitwise’s presentation sought acceptance from the Securities and Exchange Commission for BTC-based ETF i.e. exchange-traded fund where one slide had a screenshot included in it from none other than Coinbase Pro. The screenshot showcased just 0.0003% bid price spread stating,
“it had to be among the tightest quoted spread of any financial instrument in the world.”
Through this, one argument is clearly supported in crypto’s favour: as the technology of digital currency successfully eliminates all the financial intermediaries for trade execution usually found in the legacy ecosystem, it greatly achieves the primary targets of cost reduction and increased efficiency for all the participants of the crypto market.
The report also showcases the great potential the digital currency possesses. But at the same time, it also highlights the need for significant regulations in the area of cryptocurrency trading if the technology wants to reach its full potential.
Increased Efficiency, Thin Liquidity
When you take into account the fact that genuine BTC trading showcases a mere droplet in the wide ocean, making this thin spread of price more remarkable. On the other hand, traditional markets tend to experience a tight price spread in comparison.
For instance, the Treasurys market of the United States records a daily turnover within the range of 550 billion dollars and one trillion dollars. Now consider the estimates calculated by Bitwise for bitcoins. It states that genuine BTC trading records just about 273 million dollars on a daily basis. You must notice that while BTC exchanges are generally open for retail investors, Treasurys are mostly traded by the institutional investors who move a large sum.
The traditional market also points to the real scenario wherein liquidity is dictated by size which as a result controls price efficiency. However, this data showcases bitcoin to be capable of offering greater outcomes at considerably lower scales.
All these gains are occurring for bitcoin as it has successfully eliminated those intermediaries present in the traditional economic system. However, the Bitwise’s report has surprisingly revealed that for enjoying such pay-offs, traders have to count on reliable entities to perform the operations of front-end to search both sellers and buyers.
The report also suggests that out of its list of the 10 authentic exchanges, those are presently putting themselves out under the regulators’ scrutiny, are actually earning their trust.
It also brings to notice that those lengthy and costly KYC procedures might truly hold the worth. After all, they facilitate a regulatory framework that is necessary for bitcoin’s smoother back-office operations.
This report from Bitwise reaffirms Bitcoin’s attempt for lawfulness in the world. At the same time, it also appeals to bitcoin believers to accept a certain amount of regulations which in reality can be truly beneficial to them and the public.