A new study conducted by Sylvain Ribes, a cryptocurrency investor, reveals that most trading volumes from the cryptocurrency exchanges across the world are usually false or exaggerated. The researcher decided to investigate on the liquidity of the leading digital assets using a unique method known as ‘slippage’ to find out the value of each crypto across several exchanges.
Ribes applied the method by selling $50,000 worth of each crypto across a span of exchanges including the OKEx, Bitfinex, GDAX, and Kraken. Afterwards, Ribes measured the declining rate of each crypto on each exchange to determine their liquidity.
Basing on the findings, OKEx which is the largest crypto exchange globally based in Hong Kong, had the massive large slippages in terms of deposits and withdrawals from the users. The study revealed that most of the volumes particularly from OKEx and other leading crypto exchanges are fake and inflated. While Kraken and GDAX had the smallest slippages, which means that the two exchanges have enough liquidity to tackle any huge sell-offs ranging from $50,000 to $100,000.
Generally, in most illiquid markets and crypto trading platforms that experiences inflated volumes, it’s easy to influence the price of small digital currencies especially the hard forked coins. This is because the prices of major cryptocurrencies such as Bitcoin, Ethereum, and Litecoin are determined by various factors that may not correlate.
For instance, the recent decline in the prices of Bitcoin experienced in the sector is basically due to a combination of various factors such as the US government considering the Initial Coin Offerings (ICOs), negative publicity about the crypto assets, fear, uncertainty among the investors, criticism of the cryptocurrency markets.
Ribes used the term ‘slippage’ to show the change in the percentages between the highest and lowest prices basing on the traded volumes in various exchanges. The study found out that there were huge discrepancies between selected exchanges. One of the main reasons for inconsistencies between the trading platforms is basically due to unregulated markets of the digital currencies.