So this implies that the crypto markets are actually far less liquid than the trade volume implies. Suddenly those massive 10% +/- fluctuations in a day make a lot more sense.
Yeah, but everyone already knew that unregulated exchanges are faking their volumes. This isn’t news to anyone who has the slightest clue about cryptocurrency markets.
This is one of the few things about cryptocurrency markets that isn’t being disputed by anyone.
It’s something of a sign of how dramatically it would be possible for the price to crater. With less liquidity in the market a smaller amount of people trying to legitimately sell off their BitCoin could result in a massive downward spike in price. Which generally causes more people to sell, which further exacerbates how badly the lack of real buyers will lower the price. In a general sense, faking volume makes it impossible to tell what the real level of demand for something is.
Has everyone internalized that faking volume means Bitcoin’s real value to people is hard to pin down? Maybe, but it’s useful to try and pinpoint exactly how much trading is fake regardless. (30% real trading would still indicate a non-trivial portion of people who actually will buy at current price, much better than if it was 99% fake trading or something).
It's not just that, though. The markets aren't particularly liquid, and there isn't much rational basis for any particular price, and a lot of the real trades are being performed by irrational day-traders or poorly designed algorithmic traders.
It's all of these elements together that add up to the ridiculous volatility you see in these markets.
