The issue of trade volume authenticity on Chinese exchanges has surfaced again, with one user accusing the country’s busiest exchange OKCoin of manipulating volumes after bitcoin statistics sites displayed a sharp drop in a short period.
Chinese exchanges including OKCoin have been accused in the past of artificially inflating their trade volumes and even influencing prices by using in-house software ‘trading bots’. The exchanges have always categorically denied this, saying high volumes are the result of their low (or absent) trading fees.
Sudden decline in volume
Reddit user ‘circle2011’ noted yesterday that OKCoin’s CNY/BTC volumes had gone from around 115,000 BTC on 1st July to 11,000 by 12th July before all trade data disappeared from the graph on Bitcoin Charts.
Circle2011 even suggested OKCoin’s new chief technology officer, Changpeng Zhao, might have put a stop to OKCoin’s automated trading now the exchange was trying to appeal to a more international audience and is coming under greater scrutiny.
OKCoin has experienced large volume spikes previously, topping 280,000 BTC three times between February and April. The 11,000 figure on 12th July was, however, the lowest daily volume in the past six months.
OKCoin.com’s volume was 37,153 BTC on 24th July and 27,228 BTC on 25th July.
Reliability of trade data
OKCoin’s manager of foreign operations, Zane Tackett, responded to the poster’s claims, saying no OKCoin data had appeared on either Bitcoin Charts or Bitcoinity in recent weeks because those sites were trying to pull data from the international OKCoin.com site (which has not been officially launched), instead of its main OKCoin.cn site.
Tackett said the full international exchange would be up and running “within 12 hours”.
Just last month, OKCoin released a raft of new algorithmic trading tools with the specific aim of attracting high-volume traders, particularly those located outside mainland China.
Exchange denies manipulation
Zhao himself also responded to the reddit claims, writing:
“On the topic of volume, please understand a couple things. We, the exchange, do not control volume. It is what it is.”
He also pointed out that OKCoin does not set the BTC price, adding this was “a bit more obvious, but you would be surprised how many times I get asked”.
“When the price is stable, like it has been dead-stable in the past couple days, people trade less, many HFT/Algo’s triggers won’t trigger, and you see low volumes. It’s pretty simple!”
He also said there was “nothing surprising” about volumes reaching 115,000 BTC given bitcoin’s price climb from $450 to around $650 in recent weeks.
Busy trading in China
Chinese yuan (CNY) is the second-most traded fiat currency in the bitcoin ecosystem with around 19% of world volumes after the US dollar’s 52%. This is despite CNY rarely being used or exchanged outside China.
Bitcoin trading and speculation also remain popular activities in China, despite repeated warnings from the country’s central bank, and China’s exchanges have gone from relative obscurity to among the world’s busiest in the past year.
This has led to accusations of volume manipulation. Exchanges say fierce competition and the Chinese low-fee model (often 0% per trade) leads to a far higher volume of high-frequency trading (HFT), or trading algorithms deployed by actual users. As a result, in-house trading bots are not necessary.
So far, such claims have been impossible to prove either way, with reports of manipulation based on observation of movements and speculation as to the reasons. The exchanges maintain that no matter what the volume figures, their markets still have enough liquidity to buy and sell at the listed rates.
Image via crystal51 / Shutterstock