According to Bitwise Asset Management, the Bitcoin spot market has become, “significantly smaller and more efficient.”
Bitwise in a white paper that was written as a comment to the SEC, stated that the quality of the Bitcoin spot market, as well as its arbitrage strength, has, “improved dramatically” since the beginning of the previous year.
Bitwise Makes A Strong Case For Bitcoin Spot Market
In the whitepaper, the firm explained that “public perception holds a nearly opposite point-of-view, believing that the bitcoin market is uniquely inefficient and disorderly.”
The firm measured the average Bitcoin price deviation on 10 “real” exchanges and found out that it was on a downtrend, revealing that there is efficient arbitrage between the exchanges.
Bitwise added, “this comes despite high volatility and (at times) declining overall trading volume, and is driven by a large number of factors that reflect the growing maturity of the space.”
Moreover, opposing its previous report, Bitwise continued to state that about 95% of all reported trading volume for Bitcoin is either fake or wash-trading. The firm added that the trading volume numbers reported by data aggregators, such as CoinMarketCap are ‘widely inflated”.
On the other hand, Bitwise stated that “After you remove the fake volume and fake data from the equation, you are left with an extremely efficient and orderly market and one that is backstopped by a regulated derivatives market of significant size.”
According to the firm, the only exchanges that contain real data entail, Binance, Bitfinex, Kraken, Gemini, Coinbase, ItBit, Bittrex, BitFlayer, and Bitstamp. The trading volumes reported by these platforms align with real-world statistics, namely, wealth, gross domestic product, and web traffic.
To conclude, the firm stated, “In times of rapid change, people’s perceptions often anchor in the past. People who read about bitcoin today still think about Mt. Gox, when they should be thinking about Fidelity; they think about Silk Road when they should be thinking about Whole Foods. This vestigial anchoring is made worse by the poor quality of data that permeates large parts of the bitcoin ecosystem, which can create the perception that the market remains inefficient.”
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