Whether driven by enterprise, manipulation, geopolitical turmoil, or the spread of a pandemic, the winds of change have swiftly swept across every corner of the globe; Bitcoin has been no exception.
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Over the past year, Bitcoin’s image and presence in the world has changed: as the cryptocurrency space has continued to mature, there is more reliable data than ever before; market manipulation–while it hasn’t disappeared–has loosened its grip on crypto; no matter what side of the argument you were on, the Bitcoin-as-a-safe-haven narrative has been flipped on its head.
Now that Bitcoin is back over $10,000, the world is on its toes–will BTC manage to stay above the $10,000 mark? Perhaps. However, the crypto world is only as strong as its weakest links.
Historically, gathering accurate trading data has been a bit of a pain point within the industry. With market manipulation and wash trading rampant in the space, thousands of traders have fallen victim to the traps laid by false representations of the truth.
Recently, Finance Magnates spoke to Bobby Ong, co-founder and chief operating officer at cryptocurrency data aggregator CoinGecko, about the future of Bitcoin and other cryptocurrencies, as well as how his company is working to find and report the truth in the cryptocurrency world.
The following is an excerpt of an interview that was conducted on June 2nd, 2020. It has been edited for clarity and length. To hear Finance Magnates’ full conversation with Bobby Ong, visit us on Soundcloud or Youtube.
Finance Magnates · Blockchain Podcast #126 — Bobby Ong, COO of CoinGecko
Bitcoin’s movement over $10,000 is “probably a combination” of myriad factors
“I’ve heard multiple different reasons why Bitcoin may have gone up,” Bobby said. “One of the crazier things that I’ve heard is ‘oh, there’s riots in America, so buy Bitcoin,’” which seems to suggest that possible political instability in the states could weaken the dollar and raise the value of BTC.
However, “it doesn’t make much sense to me,” Bobby said.
On the other hand, “some say that [the price] shows a correlation with the S&P500 stock price going up…some people are saying that on a technical indicator level, Bitcoin had a very high monthly close at the end of May, which is a bullish signal, and [therefore], Bitcoin is going up.”
“But I think it’s probably a combination of all [these factors],” he continued, adding that the recent halving could also be a contributing factor. “There’s probably no one real reason why things are going up.”
Still, “[…] personally, I think that we will dip back down–we will test another low. How low it will be–I think there are a few support levels up to $4,000-$6,000; I can’t tell exactly.”
“Then, we’ll probably shake out a lot of people one last time, and then we’ll prime ourselves for a real boom in 2021. That’s my personal take, but I’ve been in the space long enough to know that it’s very hard to make predictions. I could say anything, but the market has its own mind.”
Part of the reason for Bitcoin’s rise over the past year could be the fact that the cryptocurrency space is maturing in a number of different ways, including the fact that market manipulation–while it is still a problem in the cryptocurrency space–is more widely discussed; it can be argued that there is much more awareness of market manipulation (and how to avoid falling into the traps that such manipulation can lay) than in the past.
”A lot of [crypto] exchanges have a very strong incentive to manipulate their data.”
Much of this has to do with Bitwise Asset Management’s presentation to the SEC early in 2019: in an attempt to get the SEC to allow Bitwise to create a Bitcoin ETF, the company effectively presented an exposé of widespread wash trading in the cryptocurrency industry.
Bobby said that before Bitwise Asset Management made its legendary presentation before the SEC last year on market manipulation, wash trading in the Bitcoin space was sort of an open secret.
This Bitwise report is glorious pic.twitter.com/2TLMpHcsJ4
— Frank Chaparro (@fintechfrank) May 26, 2019
Instead, “they only received maybe 10,000 or 15,000 monthly page views.”
“This doesn’t make any sense, because if you claim to have the same amount of trading volume as Binance or Coinbase, then you probably have the same amount of traffic–or at the very least 50% or 70% of their web traffic.”
However, “having a 95% discrepancy in web traffic? That clearly shows that something is off.”
“Anything that gets measured gets manipulated.”
CoinGecko’s algorithm examines these metrics, as well as others, and produces a score for each exchange: “we give a ranking from one to ten for each of these exchanges, and then for each trading pair, we give a green, yellow, or red traffic light to determine [if the volumes are legitimate.]”
Have these “trust scores” been effective in deterring users from suspect exchanges? “Seems to be working well so far,” Bobby said. “If you go to CoinGecko, you’ll probably see the list of exchanges [topped by] Binance, Coinbase, Bitfinex, Kraken–these are the exchanges that you should expect to see.”
Still, some of the small, scheming exchanges are working to game the system, although many have learned that they can’t just flub the numbers anymore: “I’ve been telling them, look: if you want to get a better ranking on CoinGecko, it’s easy–just stop faking things and just do the right thing and grow [your user base].”
Still, “anything that gets measured gets manipulated,” Bobby repeated.
“These guys just have a cheating mindset, and they want to find a way to cheat: they try to cheat all of these different metrics. It’s kind of a cat-and-mouse game.”
For example, when CoinGecko started tracking site traffic, “we started noticing some exchanges buying fake traffic.”
As a result, “we had to start putting in some metrics to start looking at traffic quality, for example,” instead of page views alone.
“It gets harder and harder, but you have to do what has to be done” Bobby said. “It’s kind of like an SEO game where everyone is trying to manipulate their way to ranking #1 on Google–it’s the same thing with all these exchanges. They just want to find a way to be #1 on aggregator sites.”
Still, “one thing’s for sure–consumers are aware of this issue; they’re more discerning. I think it’s harder for consumers to take whatever is displayed on sites like CoinGecko at face value; they will do more research and learn and find out if there’s real trading volume.”
The following is an excerpt of an interview that was conducted on June 2nd, 2020. It has been edited for clarity and length. To hear Finance Magnates’ full conversation with Bobby Ong, visit us on Soundcloud or Youtube.
