It's suspected (not proven) that the majority of the trade is actually wash trading to pump the price of Bitcoin. Additionally, an exchange trading in USD will be exposed to US regulation as a result of that, even if not situated in the US--if you're trying to evade US financial regulations (or sanctions), you really don't want to touch any USD whatsoever.
If an exchange charges fees, it's almost certain (and 100% certain for BFX in the past) that they waive them for certain VIPs and "liquidity partners". Same for selling/giving colo access and other higher-quality data access. (Good luck getting exchanges to publicly admit any of this, though, since it scares off the prey.)
As for spoofing and wash trading... Of course. Chinese exchanges have been notorious for this (seeing 100s of orders making up 80% of book depth out to 10% disappear on 1 tick is amusing), but it happens everywhere and is definitely not a single entity. I would guess that a significant portion of this is related to algo trading and anti-algo-trading, exploiting stupid stuff like MA crossover bots. In general, wash trading is more encouraged than discouraged, since it makes the exchange appear to have higher liquidity.
Lastly, of course, there's all the exchange fuckups and oddities that have been very quietly buried due to financial incentives on both sides, like when it was possible to list arbitrarily large orders that would simply vanish once traded into. There is a long list of incidents that could be added here, some of it public but hard to find and the rest of it too sketchy to ever talk about.
If you get into this stuff without a firm understanding that nothing is real and everyone is lying to you, you're going to have a bad time.
Just wait until they look at Bitcoin transactions. Spoiler alert, it's completely manipulated - vast majority of volume comes from wash trading with Tether on shady exchanges
It's hard to get USD and such in and out of certain exchanges. Exchanges with easy deposits and difficult withdrawals will have higher prices usually. Moving the bitcoins isn't ever a big deal.
Yes, it's widely known exchanges wash trade. This does not mean that all their volume is fake. And it's true mex only trades contracts, but I'd note they're traded only with BTC collateral so bitcoin is still exchanged.
For the most part, this report basically ignores Asian exchange volume.
Ok, trading is completely unregulated. When we are talking about exchanges we are generally talking about what they are designed to do (trade) not details about how a small amount get USD onto their platform.
Even so, these so called regulations you point to don't exist on the biggest exchanges like Bitfinex, Binance, or even Poloniex. Poloniex pulled out of states once licenses started being required to deposit USD.
An extra point to add to this: Bitmex isn't an exchange and never touched USD or any other fiat currency, you couldn't obviously use it to launder money (at least not in any way that you couldn't use any other custodial wallet to do so).
Essentially it is just a platform that lets non-US bitcoin users deposit bitcoin and place side bets on price of Bitcoin (and several altcoins, note that you couldn't deposit and withdraw those altcoins AFAIK, just place sidebets on their exchange rates).
It is easily (ab?)used as a gambling platform.
From a consumer protection perspective it's probably a disaster-- the vast majority of users lose their shirts. But I'm not aware of any accusation that there was widespread use by US persons. And CFD gambling houses are common in many places outside of the US.
There's also allegations about exchanges like Bitfinex where the owners/management trade on their own exchanges [0]. With insight on order book and people's stop prices there's an obvious conflict of interest there, as one can easily go stop hunting and manipulate prices. It's an unregulated market, and exchanges want to keep it that way (like how Binance's moving operations to Malta)
An exchange's shadiness can only affect other exchanges in proportion to its market share. If there was price manipulation on Mt. Gox and it spilled over to all other exchanges then that was because Mt. Gox was the dominant platform for trading bitcoin.
FX in general is very difficult to regulate and there are a lot of shady firms and exchanges out there. However, I think it's hard to argue that the price isn't reflective of the true exchange rate. Over $5 trillion/day changes hands at a tight spread and very low volatility. Finance is based on trust and eventually legit venues get reinforced through a feedback loop.
The majority of bitcoin movement happens on exchanges, and there's good evidence that a large proportion of exchange transactions are just wash sales, aka people transferring funds to themselves
They usually do this when they suspect there's money laundering going on, usually due to drug dealing. which, you know, DOES happen on Bitcoin exchanges.
There is plenty of evidence of wash trading occurring on Bitfinex and other exchanges - there are also many accusations that the exchanges themselves wash trade, to pump up their own volumes. They don't need to pay their own fees!
Note: the article confuses two distinct things wth each other, or at least makes it unclear: the transaction volume that is allegedly dominated by high-speed traders is in the forex market, with people trading a promise to e.g. USD, EUR and Yuan for a promise to bitcoins.
Only when someone withdraws his Bitcoin promise does it become a transaction on the blockchain. Until then it's just an exchange saying it owes you a certain amount of bitcoins. This becomes evident when an exchange defaults on this promise because of e.g. a hack, as has been the case with Mt. Gox, Bitfinex, Bitfloor and many others.
Not necessarily wash trading (though it does occur), a lot of it is just perpetual chain reactions of bots. Remove exchanges with no or negligible fees from the calculation and the volumes for these coins tend to plummet.
When I was interested in trading a long time ago it was common to move shit around in Eth or BTC or whatever until you found your USD exchanger, typically coinbase. Why would this be news?
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