Bitwise told SEC that 95% of reported bitcoin volume was suspect

Bitwise Asset Management’s analysis of bitcoin trading entered broad public view on March 22, 2019 with a stark conclusion: approximately 95% of the spot volume reported by widely used market-data services appeared fake or non-economic.

The finding was not a regulator’s determination. It was Bitwise’s analysis, prepared while the company supported NYSE Arca’s application to list shares of the proposed Bitwise Bitcoin ETF Trust. Nevertheless, its appearance in the Securities and Exchange Commission’s rulemaking record made unreliable exchange data an institutional question rather than merely an industry complaint.

What Bitwise measured

Bitwise began with exchanges listed on CoinMarketCap’s bitcoin-markets page on December 5, 2018 and worked down the ranking until reported daily volume fell below $1 million. It collected order-book and recent-trade data from 81 exchanges, reading displayed information four times per second.

For its central volume comparison, Bitwise used the March 4–8, 2019 window. CoinMarketCap data showed approximately $6 billion in average daily bitcoin spot volume involving fiat currencies or stablecoins. Bitwise’s preferred Kaiko data for ten exchanges produced estimated actual average daily volume of $273 million, equivalent to 4.5% of the reported total. The implied suspect share was therefore approximately 95.5%, conventionally rounded to 95%.

The ten exchanges Bitwise identified were Binance, Bitfinex, bitFlyer, Bitstamp, Bittrex, Coinbase Pro, Gemini, itBit, Kraken and Poloniex. CEX.IO passed the tests but was excluded from that group because its average daily volume was below $1 million. South Korean exchanges were excluded because Bitwise considered that market isolated by capital restrictions. Those exclusions limit any claim that the study measured every bitcoin venue worldwide.

The patterns behind the conclusion

Bitwise compared trade-size distributions, the timing of volume spikes and bid-ask spread behavior. On exchanges it considered genuine, smaller trades occurred more frequently, round-number sizes appeared regularly and activity rose and fell in patterns shared across venues. Volume spikes aligned because bitcoin was traded as a globally connected asset.

Several suspect exchanges displayed different behavior. Bitwise identified mechanically alternating buys and sells, nearly identical hourly volume, trade-size distributions without expected small or round-number transactions, and large spreads inconsistent with the exchanges’ claimed liquidity. CoinBene, for example, reported $480 million in average daily volume for March 4–8—18 times Coinbase Pro’s $27 million—despite trading patterns and spreads that Bitwise considered incompatible with that scale.

Those observations supported an inference, not transaction-by-transaction proof of fabrication. Bitwise did not publish a complete reproducible dataset with the presentation, and its method partly relied on information read from exchange interfaces. The company also had an interest in persuading the SEC that its proposed ETF could use a cleaner subset of the market.

Why the smaller number mattered

The analysis was designed to answer two competing concerns. On one side, it suggested that public rankings and headline volume totals materially overstated bitcoin liquidity. That weakened the usefulness of self-reported exchange volume for market comparisons, token-listing decisions and institutional due diligence.

On the other side, Bitwise argued that removing suspect activity revealed a smaller but more coherent market. Its data showed the ten selected exchanges trading at closely aligned prices, while CME and Cboe bitcoin futures averaged a combined $91 million per day during March 4–8. Bitwise compared that with Binance’s $110 million in spot average daily volume to argue that regulated futures were significant relative to the market it regarded as real.

The SEC memorandum establishes that Bitwise, NYSE Arca and their counsel presented the material to agency staff on March 19, 2019; the memorandum was dated March 20. March 22 coverage made the 95% estimate the defining public takeaway. The defensible event-date conclusion is narrow: Bitwise supplied regulators with detailed evidence that reported bitcoin volume could not be accepted at face value. The record did not establish that the SEC had endorsed the methodology, approved the proposed ETF or independently found that 95% of trading was fabricated.