Earlier this month, Bitwise reported that 95% of Bitcoin trading volume is fake. Then came today, in which, at press time, Bitcoin’s price is still rising significantly. With both of these events in mind, two logical questions arise.
What’s behind today’s rise? Related to this, why is Bitcoin reacting inversely to such negative news? Before digging into these questions, it is important to note that not all of the Bitwise report was negative. If you are interested in some of the positive findings, check out the report for yourself here.
In summary, what was central to their positive findings on Bitcoin trading is that despite the fake trading volume, the global Bitcoin market is doing well at self-regulating. On top of this, they also reported that trading Bitcoin seems to have “near-zero transportation costs” and “low-to-zero storage costs,” which appears to be contrary to the consistent message from the Bitcoin Cash community that Bitcoin trading is slow and expensive.
In addition, the report also concluded that in spite of the large amount of fake trading volume, Bitcoin still trades with “significant volume.” With all of these factors in mind, we can then move on to why Bitwise believes that the Bitcoin market can self-regulate to an extent.
Though their explanation on the subject is considerably longer, the answer to this can be boiled down to: Bitcoin is the most efficient good that can be arbitraged in history. What this means is that no other tradeable asset matches up to it in terms of the profit that can be made from its’ volatility.
Today, Michael Casey published a reaction piece to the Bitwise report and the recent rise in Bitcoin’s price in which he makes an interesting conclusion. Essentially, what it amounts to is this. Since Bitcoin is the easiest asset to arbitrage ever, it is also able to break the trend of bigger markets having greater liquidity. With Bakkt, several ETF proposals, and many other promising projects, it would appear that the sky is the limit for the rest of 2019.
By: BGN Editorial Staff