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Seems like a good thing. Look at the volume for cryptocurrencies. It seems to be insane / ridiculous, as if the sum total of all coins for almost any given cryp
by isoskeles 8y ago
Seems like a good thing. Look at the volume for cryptocurrencies. It seems to be insane / ridiculous, as if the sum total of all coins for almost any given cryptocurrency are exchanging hands weekly (I know this is not exactly what volume means, but it's close enough).
Looking at bitcoin volume on coinmarketcap right now, it's about $9B 24h volume on a $71B market cap. In just 8 days the entire market cap of bitcoin will have 'exchanged hands' (again, I know this is not exactly what volume means). Meanwhile, most people are not using bitcoin as a medium of exchange. These numbers just seem absurd to me. There's no way that people are using bitcoin as a medium or exchange OR a speculative trade that frequently, unless these traders are fickle idiots.
That said, I know little about how currencies work, so maybe I'm making some invalid assumption. But I don't see how this data being faked is at all meaningful unless you're using this data to try to estimate the "value" of bitcoin, etc. If so, yeah this is bad news for you. But how did you not know that bitcoin, etc. aren't really being used to exchange value?
- bencollier49 8y agoHigh frequency trading perhaps?
- isoskeles 8y agoPossible, but I don't think it's likely. The volume on something like BTC is higher than AAPL. It doesn't make sense and never made sense. I don't think there are enough people who wrote and confidently run their own crypto-HFT bots to compete with volume in the stock market.
- aeternus 8y agoIt does make sense if you look at how change addresses work with Bitcoin. Best-practice is to generate a new address for the 'change' from each transaction. Suppose an exchange has a hot wallet with 10btc. Each time a user requests a withdrawal, say 0.01 BTC, the exchange generates a txn that sends 0.01 to the user, and the remaining 9.99 btc to a newly generated hot wallet address. On the blockchain, we can't tell if that was a transaction for 9.99 btc or 0.01 btc and most of these 'analysis' services are considering both to be volume. This amplifies apparent volume even if no one is doing anything questionable. To use the AAPL example, this type of blockchain volume analysis is like adding each trader's private brokerage account value to the total AAPL trade volume each time they buy/sell a share.
- NelsonMinar 8y agoYes the massive volume of fake transactions is actually good for Bitcoin.
- isoskeles 8y agoI appreciate the snark, but my point is that the massive volume data on coinmarketcap is so unbelievable that I prefer knowing that it's actually lower. Do you have anything else to contribute? Would it make you happy if actually bitcoin exchange volume were $17 TRILLION dollars, or if it were reported as such?
- NelsonMinar 8y agoReally the snark is enough.
- hbosch 8y agoYou say: "Looking at bitcoin volume on coinmarketcap right now, it's about $9B 24h volume on a $71B market cap. In just 8 days the entire market cap of bitcoin will have 'exchanged hands' (again, I know this is not exactly what volume means)." And, from the deck in the article: "Despite its widespread use, the CoinMarketCap.com data is wrong. It includes a large amount of fake and/or non-economic trading volume, thereby giving a fundamentally mistaken impression of the true size and nature of the bitcoin market." (Emphasis mine)
- isoskeles 8y agoWhat exactly is your point? That I am repeating the point in a paywalled article? I have always thought the market data on cmc makes no sense, and am pointing out a simple experiment you personally can do to check.
- hbosch 8y agoI just am saying that basing any assumptions on the data from CoinMarketCap is to make those assumptions meaningless, because the data at CoinMarketCap is false. Apologies if I'm misreading your comment.