Cryptocurrency, introduced in 2009 when Bitcoin was first announced, 𒅌quickly became the focus for many investors looking for the latest opportunity to generate above-average returns🌺. Prices increased sharply, and trading volumes appeared to skyrocket over the following years.

In 2020, daily average volume had been trending below $2 billion for months, starting to climb only in late November 2020. In late July 2021, as the price of a Bitcoin (BTC) reached $40,000, trading volume hit $9.2 billion. By late 2024, Bitcoin had a 24-hour trading volume of more than $33 billion—but it was dwarfed by Tether (USDT), which had a 24-hour trading volume of more than $60 billion.

But are these figures accurate, or are they somehow faked? Sometimes, these indicators reflect both fake and real circumstances, so it's difficult to decide whether to rely on publicly available information. Here's a rundown on the importance of trading volumes, why they are being faked, and what is being done about the practice.

Why Crypto Trading Volumes Matter

Large trading volumes generally indicate the amount of liquidity and activity specific cryptocurrencies have over a period. Traders require liquidity to keep from ꦗbeing locked into positions for extended periods.

High volumes are also important indicators of potential price m𝄹ovement: an increase in trading volume is generally considered by many traders to be a precursor to a big price mov🐽e.

How Crypto Trading Volume Is Faked

Generally, crypto volume is faked using artificial trading techniques, such as programs that execute trades automatically. For example, in 2022, a Forbes analysis of crypto markets indicated that more than half of Bitcoin trades were fake. Most of the fakes were generally 澳洲幸运5官方开奖结果体彩网:wash trades conducted by bots, accompanied by insiders publicly pumping cryptocurrencies and engaging in pump-and-dump schemes.

In October 2024, the Securities and Exchange Commission charged three companies and nine people with manipulating crypto markets using this same techniquওe.

These individuals hired two companies to provide crypto market manipulation services through trading bots, which automatically and artificially increased the trading volume of a particular cryptocurrency. Unbeknownst to the accused parties, the cryptocurrency was created by the Federal Bureau of Investigation and used in an operation with the SEC to identify market manipulators.

Other individuals conducted manual wash trades in addition to bot trading to generate large volumes and create the illusion that the cryptocurrency was gaining traction in the market.

Actions Taken to Address the Issue

Many data aggregators and cryptocurrency information sites have taken actions to reduce their reporting of fake transactions. For example, CoinMarketCap formed the Data Alliance as a way for exchanges and other crypto-related institutions to communicate and facilitate transparency.

As of 2024, regulators are still devising ways (like fake coins) to track down crypto-c🦄riminals and scammers in their efforts to protect investors. They will likely continue working to identify and prosecute volume scammers because there are no indications that scams, thefts, and hacks regarding cryptocurrency will slow down.

The Future of Fake Crypto Trading Volume

Artificial intelligence (AI) is often publicized as the next technological advancement. Regular investors and regulators should be worried about AI and robo-traders because these techniques will drꦆastically change th𒁏e way markets can be manipulated.

Some 澳洲幸运5官方开奖结果体彩网:cryptocurrency exchanges even promote artificial intelligence (AI) in crypto trading, publishing articles that discuss the benefits of using AI in crypto trading. While not necessarily published with ill intentions or as a way to artificially increase trading volumes, promoting AI as a way to conduct trades in a space already filled with bots creating false trades for volume purposes poses several problems.

For example, it will become very difficult to distinguish between bots created for fake trading and AI that need a parameter adjustmen✤t because it was wash trading. Regulators will need to spend more time determining intent and fault, if programs were poorly designed, not tested appropriately, or whether they were intentionally wash trading.

As of October 2024, regulations regarding bots and using artificial intelligence in the markets is being discussed, and advisories are being issued to address fraudulent trading activity using AI; however, it's difficult to tell when any of these discussions will turn into regulations and enforcement.

The Bottom Line

Some people may not 𝓰even be aware that trading activity has been and is being faked to create a false sense♓ of safety in the markets.

There are many valid trades occurring on cryptocurrency exchanges, and the regulated ones—and some unregulated exchanges—are working hard to ensure traders and investors are protected from scams. However, it remains the responsibility of users to be vigilant and educated and to decide for themselves whether trading cryptocurrency is worth the risk.