The bitcoin price has touched new yearly lows this week, and as usual traders and investors are looking for reasons why, yet they are as clueless as ever.
Amongst all this doom and gloom new research from CryptoCompare suggests that the South Korean cryptocurrency exchange Bithumb may have contributed to the recent sell-off.
According to the firm’s latest CCCACG (short for CryptoCompare’s Aggregate Pricing Index), Bithumb led all crypto exchanges in daily volume from October 2018 to November 2018, averaging $1.24 billion in daily turnover. That represents a month-over-month increase of 284 percent, even as global exchange heavyweights such as Bitfinex and Binance endured a 30% and 34% decline in volume respectively.
Unsurprisingly, Bithumb’s volumes were not entirely organic, which is why CoinMarketCap and other data aggregators still list Binance as the world’s highest volume cryptocurrency exchange. Rather, Bithumb’s increased volumes correlated with several trading promotions, “Super Airdrop Festival” and “Special Gift.” These promotions appear to have enabled Bithumb to ramp up its daily volume and the prominence of KRW trading in the spot crypto market even as its number of active traders decreased significantly, according to web analytics.
From the report:
“Bithumb saw a 284% increase in volumes from the previous average of 323 million USD for the Sept/Oct period. This increase in volumes follows after Singapore-based BK Global Consortium bought a controlling share in the exchange in recent months, and later implemented a series of airdrop competitions, raffles, rebates, and other programs designed to incentivize non-Korean users to sign up to the exchange and trade in exchange for rewards. They have also implemented a potential form of trans-fee mining for certain users, where trading beyond a specific volume is rewarded in the form of “Bithumb Cash” at a later date.”
Higher trading volumes tend to correlate with a strong bitcoin price, while lower volumes tend to accompany gradual downward movements. Consequently, the fact that Bithumb, along with several other lesser-known exchanges, managed to increase daily turnover even as their active user bases shrunk might indicate that these trading promotions helped the bitcoin price remain stable above $6,000 for longer than fundamental and technical factors suggest that it should have.
The report notes bitcoin’s first break below $6,000 occurred shortly after one of Bithumb’s trading promotions ended, at which point the went into a downward trajectory from which it has thus far not been able to recover.
Another interesting piece, is if we look at order book depth:
We see that Bitfinex has by far the most health order book depth, yet Bithumb has an astonishingly large amount of trading volume but a low order book depth relative to other exchanges. This smells fishy to us and is a prime indicator of wash trading or fake volume.
There you have it, today the blame for the collapse of the Bitcoin price lies on the Koreans, not the Chinese, not the Russians and not Donald Trump.
Who do you think is to blame for the price tanking over the past two weeks? Let us know in the comments below.