How Small, Unregulated Exchanges Are Raising the Numbers in Crypto Volumes Against All Odds
When people look into cryptocurrency
exchanges, the first two names are almost always Binance and Coinbase. These
two exchanges, after all, claim to have the lion’s share in transaction volume
(Binance) and amount (Coinbase,) thus monopolizing the market.
Those claims aren’t lies – Binance is
indeed the single exchange moving the most crypto tokens on any given month,
while Coinbase indeed has the largest amount of transactions most of the time.
The detail these claims always seem
to ignore is that neither of those exchange has 50% of their market. In fact,
they’re nowhere near.
A fragmented market
It’s easy to believe those exchanges
would be the ones processing the vast majority of transactions, considering
they’re almost unanimously recommended. And to be fair, they are processing the
vast majority of transactions and, as one would expect, the large, regulated
exchanges do hold a vast majority of crypto traders and users.
But things change when we look into
transaction amounts. While Binance can claim to be the single exchange with the
largest traded volume, they can’t claim to have a majority of the market – in
fact, they can’t even claim that the largest transactions are being made
through them.
This is because, as per
recent reports, for some reason the largest transactions aren’t taking
place on Binance, or Coinbase, or Bittrex. They’re instead taking place in
small, unregulated, often poorly rated exchanges. But why is this?
The seedy underbelly of crypto
There’s one reason that immediately
comes to mind when considering these facts. Cryptocurrencies are a well-known method
of sending and receiving crime-related payments, down to the point that dark
web dealings basically require you to handle them.
Bitcoin and other
cryptocurrencies, after all, owe part of their relevance to these groups, who
quickly adopted the tokens due to the anonymity they provide.
Perhaps a decade ago, when crypto
exchanges were still young, dark web denizens wouldn’t have minded buying or
selling their tokens on large exchanges. Back then cryptocurrencies were
considered an absurdity by many, and governments weren’t even thinking of them.
Fast forward to today, and more and
more exchanges are getting regulated. These regulations are problematic because
they require users to provide legal identification.
Also, while blockchain has
been touted as secure and at times anonymous, it is actually possible to find
out who owns a wallet if you have a transaction where they had to identify
themselves.
And you have to identify yourself to
conduct transactions on regulated exchanges.
Thus, it only makes sense that those
actively looking to keep the government and law enforcement out of their
dealings would gravitate towards unregulated places – trying to offload your
ill-gotten bitcoin on Coinbase or eToro would likely end up with you being
investigated sooner or later, after all.
While this is the most likely reason,
there’s another thing we must consider: Exchanges themselves might be lying.
Untrustworthy
exchanges might provide untrustworthy data
D-rated exchanges and the like are
known by the community for providing less than desirable services and often
lying about what they offer. There’s, after all, a reason they’re low-rated.
On top of that, these exchanges
aren’t regulated. This means that not only aren’t transactions under these
exchanges protected by law, but also there’s nobody auditing them and making
sure their claims as to how many transactions they have or how much crypto they
move are real.
This in turn means we only have the
word of these exchanges, who are known for lying, to back up their claims,
which works out to no back ups at all. In some cases, one could check thetransactions coming in and out of an exchange’s own wallets to try and guess
how much they’re moving – but nobody can know for sure, as intra-exchange
transactions aren’t reported.
Seedy exchanges are seedy for a
reason, and one of the easiest ways to get people to sign up to them is
convincing them your tiny exchange is actually huge. Faking transaction numbers
and amounts, then, is a great idea.
Conclusion
There’s always a chance there’s some
other reason that can explain this peculiarity in the market – however, these
two are the most likely ones. Occam’s razor tells us we should always expect
the simpler explanations to be true – and certainly in this case the simpler
ones are illegal activity, which is known to use crypto, and outright lies.
As the market matures and unregulated
exchanges are cracked down upon (it will happen in many countries,) the truth
is likely to surface. For now, however, all we can do is guess as to why the
market is shaped this way.
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