Trading volumes reported by exchanges in Asia became a talking point again over the past weekend, after some companies altered the way trades are counted on bitcoin futures markets.
The latest issue arose last week when OKCoin‘s manager of foreign operations Zane Tackett posted a thread on reddit’s ‘Bitcoin Markets’ page, titled “You might have noticed OKCoin futures volume experienced a sudden rise (doubled) over night, here’s why”.
OKCoin, Tackett wrote, had noticed competitors 796.com and BitVC (a subsidiary of Huobi) were employing a counting method that regards a single bitcoin traded as two units: one bought and one sold.
In doing so, OKCoin’s 24-hour high volume that week leaped instantly from 300,000 BTC to 600,000 BTC. The company did not retroactively alter historic trading data before that date.
Industry standard?
Since other exchanges were employing this “industry standard”, it made sense for OKCoin to do the same, he said, while revealing the information publicly in the interests of transparency.
Tackett made it clear, however, that OKCoin does not necessarily endorse this counting method and was simply following others so that comparisons could remain accurate.
“We want to use the traditional method since that’s the method used in the traditional finance world. Furthermore, we will be switching back to the traditional method for all westerners, ie: our English page will report it using the traditional method, any western site that pulls our data will be provided with volume using the traditional method, and we will only use double counting for domestic purposes.”
At present the counting method is employed only on digital currency derivatives exchanges, while the companies’ spot markets retain the traditional method of 1 BTC traded = 1 BTC in volume.
Futures market method
Responses to OKCoin’s Reddit disclosure were mixed. While some praised the company for publicly stating the change, others questioned whether counting trades this way should be regarded as an industry standard.
Huobi’s Robert Kuhne told CoinDesk the counting method comes from futures markets outside the cryptocurrency world (links in Chinese language), explaining:
“Whether each 1 BTC transacted should be counted as two for the calculation of cumulative futures trading volume is not something we can say. However, this is also the method of cumulative volume calculation used by Chinese commodity futures markets, so this wasn’t just something invented by BitVC and 796.”
OKCoin chief technology officer Changpeng Zhao said falling into line with competitors was the main motivation behind altering the calculations, saying the exchange was “one against two on this reporting method”.
Users who prefer the previous method, he added, are now aware of the change and could simply divide by two to compare historic figures.
“In a free and open market promoted by bitcoin, everyone has their choice to report in whatever format they wish, as long as they make it clear what the format is.”
Transparency in disclosing reporting methods is very important, Zhao said. He pointed out OKCoin had not been aware its competitors were using the double-count method until it had been pointed out by some users.
Not all will follow suit
Not all exchange operators, however, see the counting method as preferable. CEO of London-based bitcoin derivatives trading platform BTC.sx, George Samman, called the method a “disingenuous” way to inflate volumes that served little other purpose.
“When 1 BTC changes hands from buyer to seller it is only one bitcoin. Same as the share market or any other market. We do not count volumes like that and as far as switching goes we have no plans to do this.”
Kuhne also said transparency is important, along with consistent standards, and that Huobi would consult with other companies planning to launch bitcoin derivatives platforms in future, such as BitMex.
Since the three large Asia-based exchanges were now using the double-count method, it is likely to be an industry standard for the foreseeable future “whether this is the most logical way or not”, he said.
BitMex CEO Arthur Hayes said that when the Hong Kong-based exchange goes live later this month, it will follow traditional asset derivatives exchanges and count the matching of buyer and seller as one trade, not two.
“We believe that double counting trading volume paints a false picture of exchange liquidity. Traders not aware of these non-standard reporting practices could potentially assume there is greater liquidity than exists in reality. As a result, estimates of market impact are rendered useless.”
OKCoin added bitcoin futures trading to its Singapore-registered international exchange OKCoin.com in August. Huobi joined in with its Hong Kong-based subsidiary BitVC the following month.
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