Digging Deeper on Crypto Exchange Data and Transparency

Clay Collins is CEO and co-founder at Nomics, an API-first cryptoasset data company delivering market data to institutional crypto investors and exchanges.

On March 19th, Bitwise came out with a report to the U.S. Securities and Exchange Commission that made two claims of particular interest to us at Nomics.

Eight of the 10 cryptocurrency exchanges identified by Bitwise as good actors provide historical trade level data.

It makes sense that opacity around exchange data would be correlated with fake volume, toxic activity, and wash trading.

Just like an IRS audit, the more data history and granularity provided by an exchange engaging in nefarious activities, the more likely they are to be caught.

Bitwise is looking at the data and giving individual exchanges a thumbs up/down.

The public's response to the report has been unfair to upstanding exchanges not examined by Bitwise.

Much of the response to Bitwise's report has involved restricting volume analysis to the 10 exchanges identified as having "Actual volume." However, this reduction in scope results in analysis that's stuck in time; it also over-extends Bitwise's findings to cryptoassets other than bitcoin, and exchanges that don't have BTC/USD or BTC/USDT markets.

Instead, as an industry we need to get iteratively better at spotting suspect exchange behavior on a near real-time basis.

We need formal open source methodologies that can be used by any independent third party to evaluate exchange activity in real time.