Crypto Markets are Plagued with Manipulation, “Endless” Wash Trading, but Industry Execs are Confident about H2 2020 Performance: Report

The digital asset trading market did not perform as well during Q2 2020 when compared to Q1 2020, according to an industry research report from Token Insight.

According to the report, the relatively poor performance of the crypto market during Q2 2020 may be attributed to very low volatility or price fluctuations, mainly throughout June 2020.

The market sentiment, according to Token Insight, was “exhausted” due to the Bitcoin (BTC) halving event that took place on May 11, 2020.

The Token Insight team said they interviewed the executives of around 30 digital asset exchanges and learned that they all appeared to have a positive attitude towards the crypto market, particularly with how it may perform during H2 2020.

However, the report noted:

“Many key issues in the [cryptocurrency] market have not been resolved, such as: lack of a targeted compliance framework, decentralized liquidity of different trading markets, lack of custody leading to opaque assets, manipulation, endless wash trading and manipulative behaviors still exist in the market.”

As confirmed in the report, the total spot trading volume of crypto-assets during Q2 2020 was valued at $5.44 trillion, which is down by around 18% when compared to Q1 2020.

An analysis of Bitcoin (BTC) price and the Nasdaq Composite Index (^IXIC) indicates that “hot money may have undergone a small-scale switch between the US stock market and the cryptocurrency market, but it still hesitates to enter the spot trading of cryptocurrency,” the report noted.

The report pointed out that the market value of Bitcoin or BTC has accounted for over 65% of the overall market value of all crypto-assets for a relatively long period of time. When BTC had reached an all-time high of nearly $20,000 in December 2017, Bitcoin dominance had been lower at around 50% for a long time, before it reached the levels it’s maintaining now.

Bitcoin trading volume declined to 39.9% of all crypto trades during Q2 2020, the report revealed.

According to Token Insight, the “extremely high market value ratio of BTC and its low trading volume ratio are misaligned.” They argue that the “narrow range of shocks cannot attract funds to … the market.”

They added:

“This quarter’s centralized spot exchange fee income is estimated to be $472 million, which remains the industry’s profit center. The cryptocurrency spot industry is far less competitive than the derivatives industry. Exchanges such as ZB seize the opportunity to focus on the spot market layout.”

The volume of crypto-asset trading carried out on decentralized or non-custodial exchanges during Q2 2020 reached $191.4 billion, which is notably around the same as Q2 2017 levels reached by centralized exchanges.

(Note: The full report is available here.)

Last month, Token Insight reported explosive DeFi growth, after cryptocurrencies crashed on Black Thursday just like traditional financial markets.

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