How To Detect Suspicious Crypto Exchanges

By May 17, 2019 September 16th, 2019 Cryptocurrency
Crypto Exchanges

The entire crypto market has been on a fast uptrend this past week with the recovery of bitcoin. For crypto traders, choosing the right crypto exchange platform to trade on is equally as important as choosing the right asset to have in your portfolio. With recent catchy news headlines about “suspicious exchanges” and “fake volumes,” the public has long speculated that exchanges have manipulated the crypto market. As easy as it is to be swayed by sensationalized headlines, how can crypto traders objectively look for suspicious exchanges by themselves?

Using Technical Data to Spot Abnormal Trends

In the following section, we will share examples of how to use our team’s tools and research – like our Coinscious Terminal and exchange reports – to learn how to detect suspicious exchanges on their own.

a) Real-time Analytics

We start by analyzing Figure 1 which shows huge spikes in Bitcoin volume and price pump that occurred on April 2, 2019.

Figure 1. Price of Bitcoin (BTC) in USD at Bitfinex on April 2, 2019 at 7 A.M. EST.

Crypto Exchanges

We can look at volume changes directly from our Coinscious Terminal for the top 18 mainstream exchanges. The data table in Figure 2, shows volume changes on April 2 for the top ten exchanges in blue. There are very drastic volume changes greater than 70% for all exchanges listed, except for Fcoin. Fcoin only had a 10% volume change, indicating that crypto traders should be wary of trading on this exchange as it is most likely faking its volume.

Figure 2. Top 10 crypto exchanges by ranked 24-hour volume on April 2, 2019 from: https://terminal.coinscious.io/exchange/

b) Historical Data

Next, we will analyze a plot of ETH/BTC daily volume for the same 18 crypto exchanges between January 16 to February 16, 2019 from our exchange report. In Figure 3, ZB is the only crypto exchange with an exchange volume curve that sticks out to the far-right. What exactly is going on here?

Figure 3. ETH/BTC pair daily volume for each exchange from February 16, 2019 to March 16, 2019 in USD.

Crypto Exchanges

We can further analyze this anomaly by using principal component analysis (PCA) and plotting exchanges based on the first two principal components, PC1 and PC2. From the plot in Figure 4, we can see several crypto exchanges clustered together at the bottom-left. These represent exchanges that are correlated with one another and hence, follow similar volume trends. Conversely, there are clear outliers like Binance, Fcoin, HitBTC, HuobiPro, OKEx, and ZB. These outlier exchanges have volume trends that diverge from the market mean.

Figure 4. PCA volume analysis for ETH/BTC. The biplot, where the two main principal components are used to represent the exchanges, allows us to identify clusters or groups of exchanges that might be correlated according to volume.

Crypto Exchanges

We can even take this one step further and use a more quantitative way of measuring, by looking at volume correlations between exchanges. In the green box in Figure 5, all the intersections coloured in bright orange means that these exchanges are positively correlated; they follow similar crypto market trend patterns.

Figure 5. Daily volume correlations between exchanges from January 16, 2019 to February 16, 2019 for ETH/BTC. Correlation ranges between -1 and 1. Correlation close to 1 indicates a more positive relationship between the pair of cryptocurrency returns and correlation close to -1 indicates a more negative linear relationship. Correlation close to 0 indicates no linear relationship.

Crypto Exchanges

The exchanges in the blue box, with intersections coloured in red and black are anti-correlated to the exchanges in the green box. Therefore, this means that bitFlyer, Fcoin, HitBTC, Zaif and ZB have volume trends that go against those exchanges in the blue box listed on the x-axis.

What’s really interesting are the exchanges in the yellow box. Some of these exchanges have no correlation to one another while others have negative correlations. An explanation for this may be due to different trading bot algorithms that run on each exchange. Since they have different algorithms, this creates no correlation or negative correlations between the exchanges.

c) Additional Research

This March, Bitwise Asset Management released a report to the SEC highlighting the problems and common misconceptions of crypto exchanges. Bitwise’s study reveals that “95% of volumes is fake and/or non-economic in nature, and that the real market for bitcoin is significantly smaller” [1].

By looking at the shape of trade size histogram distributions, they compare crypto exchanges that follow a natural exponential decay pattern (Figure 6a) versus suspect exchanges that have highly irregular shapes (Figure 6b). Their findings indicate that there are only 10 well-known exchanges that have actual volume including: Binance, Bitfinex, bitFlyer, Bittrex, Bitstamp, Coinbase, Gemini, Kraken, itBit, and Poloniex.

Figure 6a. Trade size histograms for well-known exchanges that show natural patterns

Crypto Exchanges

Figure  6b. Trade size histograms for suspect exchanges that show irregular patterns.

Crypto Exchanges

Developing Stronger Technical Skills

Technical data is crucial for understanding the nuances of the existing crypto market. All of the examples above demonstrate how simple it is to identify outliers and suspicious exchanges once crypto traders know how to read and interpret technical analyses. By providing direct access to our team’s analysis, tools and accurate data, we make it easy for crypto traders to have all the necessary means to succeed. In doing so, crypto traders no longer need to make decisions solely based on catchy headlines but rather, they can discover fairer and more reliable crypto exchanges based on objective data-driven insights.


Find out more about all the tools and resources we highlighted in this article:


  • Coinscious Terminal: real-time analytics on the top 100 coins/tokens, 18 mainstream crypto exchanges, and top technical trading indicators



[1] Bitwise Asset Management. “Presentation to the U.S. Securities and Exchange Commission.” 2019, www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5164833-183434.pdf


The information contained herein is for informational purposes only and is not intended as a research report or investment advice. It should not be construed as Coinscious recommending investment in cryptocurrencies or other products or services, or as a solicitation to buy or sell any security or engage in a particular investment strategy. Investment in the crypto market entails substantial risk. Before acting on any information, you should consider whether it is suitable for your particular circumstances and consult all available material, and, if necessary, seek professional advice.

Coinscious and its partners, directors, shareholders and employees may have a position in entities referred to herein or may make purchases and/or sales from time to time, or they may act, or may have acted in the past, as an advisor to certain companies mentioned herein and may receive, or may have received, a remuneration for their services from those companies.

Neither Coinscious or its partners, directors, shareholders or employees shall be liable for any damage, expense or other loss that you may incur out of reliance on any information contained in this report.

Leave a Reply