Bitwise Said 95% of Reported Bitcoin Volume Was Non-Economic

Bitwise Asset Management filed a study with the U.S. Securities and Exchange Commission on May 24, 2019 arguing that roughly 95% of reported spot-bitcoin trading volume was fake or non-economic.

The finding directly challenged the market statistics then used to rank cryptocurrency exchanges. It also served a regulatory purpose: Bitwise was supporting NYSE Arca’s proposal to list shares of the Bitwise Bitcoin ETF Trust, a product whose prospects depended partly on answering SEC concerns about manipulation, price discovery and surveillance in bitcoin markets.

The filing did not establish through an SEC finding that 95% of volume was fraudulent. It presented Bitwise’s analysis as an interested ETF sponsor, and its conclusions depended on methodological judgments about which trading patterns represented economically motivated activity.

Ten exchanges passed Bitwise’s tests

Bitwise examined 83 exchanges and said 73 failed one or more of three principal tests: trade-size histograms, alignment of volume spikes across venues and bid-ask spread patterns. It identified Binance, Bitfinex, Coinbase Pro, Kraken, Bitstamp, bitFlyer, Gemini, itBit, Bittrex and Poloniex as the ten venues that passed all three.

Using Kaiko data covering April 1 through April 30, 2019, the study calculated average daily spot-bitcoin volume of $554,488,345 across those ten exchanges. Binance accounted for approximately $217.6 million, followed by Bitfinex at $78.2 million, Coinbase Pro at $73.2 million, Kraken at $61.3 million and Bitstamp at $58.6 million.

Bitwise compared that $554.5 million total with approximately $11 billion in reported average daily volume. It classified about $10.5 billion as fake, wash-traded or otherwise non-economic, producing the rounded 95% figure. The calculation applied to the study’s selected exchanges, pairs, data providers and April observation window—not to every bitcoin transaction or every form of trading worldwide.

South Korean exchanges were excluded from the globally connected market comparison because Bitwise considered capital controls to isolate their prices and liquidity. The study also acknowledged a gray area: exchanges outside its approved group could contain some genuine activity even when their aggregate patterns failed the screens. The analysis therefore did not prove that every trade on the other 73 venues was fabricated.

A smaller market, but tighter prices

Bitwise’s broader argument was counterintuitive. It said removing questionable volume revealed a smaller but more orderly market. Using an equal-weighted consolidated price from the ten selected exchanges, the firm measured second-by-second pricing from the beginning of 2019. It reported average exchange deviations ranging from 0.06% on Coinbase to 0.20% on bitFlyer, with a ten-exchange average of 0.12%.

For a separate window beginning April 1, 2018, Bitwise examined instances when an exchange price diverged by more than 1% from its consolidated price. It said more than half of those discrepancies disappeared within five seconds and more than 90% within 34 seconds. Bitwise interpreted that result as evidence of active arbitrage and a functioning global price-discovery process.

The paper further reported an average median spread of $1.31 across the ten venues during April 2019. On the five most liquid selected exchanges, it placed median spreads between $0.01 and $1.75 while bitcoin traded around $5,000 during the month. These were study-specific measurements, not universal transaction costs; fees, withdrawal restrictions, account access and counterparty risk could still impede arbitrage.

What the filing changed

The May 24 filing shifted the ETF debate from whether cryptocurrency data were unreliable to which data should count. Bitwise argued that inflated exchange rankings distorted public understanding but did not control prices on the venues it considered genuine.

That was a material institutional claim, not a regulatory conclusion. The SEC docket verifies when and where the paper entered the public record, while the paper documents its data and calculations. Whether its binary exchange classifications captured the full amount of genuine trading remained an open question on May 24, 2019.