A survey by Forbes magazine claims that 51% of all Bitcoin transactions are fake.
This finding comes in the wake of the “crypto Crash” of 2022 during which the value of Bitcoin has plunged by more than 70% since its peak in November 2021, engulfing in its wake trillions of dollars and numerous bankruptcies.
In its survey, Forbes spots about 10,000 various cryptocurrencies, a kingdom where Bitcoin reigns supreme, accounting for 40% of the US$1 trillion (G $US) of crypto assets in circulation. According to the New York Digital Investment Group, 46 million American adults hold Bitcoins not counting a growing number of institutional investors and corporations.
But to what extent, Forbes asks, can the investor rely on the information conveyed by cryptocurrency exchanges and online brokers about Bitcoin transactions?
A phenomenon often denounced is the omnipresence of what is called in the United States wash trading, a maneuver by which we create the illusion of a high volume of buy and sell transactions to make believe in the growing popularity of an asset and to boost its price. These fictitious trades are executed by robo-traders at the same time as insider investors circulate favorable rumors.
Thus, the valuation of bitcoin transaction volumes vary widely. According to CoinMarketCap, the daily transactions of the cryptocurrency amount to 32 G $US, but CoinGecko puts them at 27 G $US, Nomics at 57 G $US and Messari, at 5 G $US.
Above this uncertainty floats the fear that crypto-parquets are insolvent, fears verified by the bankruptcies of Voyager and Celsius.
After an evaluation of 157 crypto-parquets worldwide, Forbes draws the following conclusions.
1- More than half of the transactions reported are likely to be false or of a non-economic nature. As of June 14, Forbes was calculating at 128G $US the volume of daily transactions on Bitcoin. This is 51% lower than the 262 G $US reported by prosecutors.
2- In terms of false transactions, the biggest problem is firms that claim high volumes, but that operate without any regulatory supervision, or very little, yet likely to make their figures more credible. This is the case of Binance, MEXC Global and Bybit which are among those less regulated parquet floors that together have transaction volumes of 217 G $US but that Forbes calculates rather at 89 G $US.
3-Perpetual futures are contracts that do not require investors to renew their positions and constitute a significant part of cryptocurrency transactions. The creation of new assets like “stablecoin” and “perpetual” creates complications for national regulators looking to regulate crypto markets. U.S. exchanges make very little use of these instruments in their transactions.
That crypto-transactions are falsified does not necessarily deny the value of Bitcoin. In a recent article, Mark Casey, a portfolio manager at Capital Group listed some of the virtues of Bitcoin. Although it has no intrinsic value, like gold, Bitcoin has the advantage of a capped supply, it cannot be censored, it is difficult to confiscate it. These are interesting qualities when you consider that more than half of the world’s population lives in authoritarian regimes where they can be denied access to the banking system – something Justin Trudeau allowed himself to do during the episode of truckers in Ottawa.
In the same article, Douglas Upton, an analyst at Capital Group, believes that the scarcity of Bitcoin is fake and the result of a deliberate decision. It is inefficient when it comes to transferring money via the Internet – yet its primary mission. Above all, its value lies entirely in the fact that people buy it only because they hope that other people will continue to buy it by paying more. “It looks a lot like a pyramid sale to me,” he says.
