Understanding Bogus USD Crypto-currency ‘Volume’: Why you should disregard FakeUSD™ Prices and Volume.
In Crypto-Markets, pretty much every single crypto-coin is always priced in United States Dollars, or, USD. Internally, exchanges may show the prices in terms of Bitcoin if they’re not using USDT in the pairing, but the reality is nobody cares about this.
They care about the “USD”, or fiat values, because it is these values that these people want to buy their Lambos with.
Many of these people can’t ‘cash out’ on these exchanges either. They have to convert to Bitcoin, and then cash out for fiat on a real money exchange.
It is for this reason, that prices and volume on these exchanges should be ignored.
Let’s take a glance at Coinmarketcap.
Traders don’t care if they become worth more Bitcoins… if those more Bitcoins represent less dollars (or other fiat currency).
If you ask a trader if he’d rather have 100 Bitcoins worth $1 million, or 1000 Bitcoins worth $100,000, he’s going to go for the million most of the time unless he hates money.
However, there is a very important point that pretty much every cryptocurrency trader is missing.
The majority of exchanges, and trading, is not done in US Dollars
For example, here’s the Number 1 Volume exchange at the time of this post, Binance.
You’ll notice that the top pair is “USDT”, an arguably counterfeit US dollar intended evade anti-money laundering regulations and various other banking regulations.
Tethers aren’t US Dollars, yet they get reported as if they were US Dollars. The media sees this volume and treats it as USD. This is a mistake.
Coinmarketcap shows this volume at $444 million. The real volume is of course, is $0 USD.
Take a look at the second most popular pair. “Verge”.
Coinmarketcap reports that volume is $149 million.
People traded Verge, to BTC.
How much US Dollars changed hands? $0.
The volume is $0.
The real volume is going to be Verge/BTC, but Coinmarketcap doesn’t show those numbers. They attempt to convert it to USD and show the “USD” value by default.
This is why the entire crypto-market moves together on Coinmarketcap. If Bitcoin goes down, the prices of everything goes down, and so does the volume, because the volume is inflated.
You cannot treat Crypto/Crypto as “US Dollar” volume or US Dollar liquidity
Imagine for a moment that you go to a Pokemon trading show where people can buy and sell their Pokemon cards. Outside the trading convention Pokemon cards are bought and sold on say… eBay.
So the cards in fact have a US Dollar value.
The trading convention announces that nobody can bring money into the convention (no banking), however, traders can trade their Pokemon cards among themselves however they see fit, but they can only trade their Pokemon cards.
The trading convention does not allow the trading of anything but Pokemon cards.
So, trades commence and people are trading their Charizard’s and Pikachu’s and all of the Pokemon cards have buy orders and sell orders in every pair. Maybe while the trading convention is going on Nintendo nerfs Charizard and Buffs Mewtwo and as a result those exchange rates change dramatically…
However…. there’s no fiat currency at this trading convention. There’s no money.
At the end of the day, how much money changed hands? $0. There’s no money, just Pokemon cards.
But wait, nobody cares about the Pokemon cards, they just care about what the “USD” value is, which is why everyone checks their “Blockfolio” in terms of USD.
Now imagine if someone came into the convention with a Pokemon card called “PokeUSD™” and he claims, with absolutely no proof, it’s totally backed by US Dollars, and the convention looks the other way lists it, and now adds all Pokemon/PokeUSD™ trading pairs and reports it as if it was US Dollars.
How much money is trading hands?
Yep, still $0. PokeUSD™ isn’t USD.
If you want to price things in US Dollars… you need a US Dollar pair for it
The truth is for exchanges that do not have US Dollars on them, the volume is $0 USD. If an exchange has no fiat currency at all… again, the volume is $0.
The same rule applies even on exchanges with US Dollars, if they have a Crypto/Crypto pair, this does not count as US dollar liquidity.
When you trade Crypto/Crypto, $0 USD is being exchanged.
Remember this when you’re looking at the daily volume in terms of USD. The only volume that counts, if you are looking at the USD values, is on exchanges with real banking (not money laundering banking), and real money.
How many exchanges in the Top 10 in reality have no US Dollars in them? Let’s count them.
Binance, no money.
OKEx, no money.
Upbit, KRW
Bitfinex, no money. (controversial)
Huobi, no money.
Bithumb, KRW
Bittrex, no money.
GDAX, USD
HitBTC, no money.
Kraken, USD
I’d go as far as saying the volume on Bitfinex is also $0, because chances are the ‘iFinex’/’Tether Limited’ corporations in reality have $0, as all of their money is stuffed in legally unaffiliated shell corporations.
If Bitfinex doesn’t legally have bona-fide banking in their own name, the accounting entries on Bitfinex/Tether in reality are worthless since Bitfinex technically doesn’t have the money, some shell company you don’t know about has it.
You’re simply trading USD accounting entries of a company that does not actually have legal ownership of those USD.
So, you may ask which exchanges have real banking and real USD?
Simple.
Bitstamp
Gemini
GDAX
Kraken
That’s it. That’s your USD volume. The rest of the exchanges that show “USD” trading are tantamount to Clarence Dollars.
As a fix for this, I’d like to see development of a more sane “Coinmarketcap”, a Coinmarketcap that doesn’t show USD prices for non-USD pairs, or USD volume for non-USD pairs.
A Coinmarketcap that only shows bona-fide USD volume so that observers can really see the real volume, and not a bunch of fake money volume with exchanges that allow wash trading.
These pairs can still be displayed, but only in terms of Bitcoin, and not misrepresented as USD.
In the meantime, when calculating the price and volume, if you’re using USD as your currency…. you can only count real USD pairs as real volume and prices.
Trade carefully.
- Clarence… er… Bitfinex’ed
