By HVY Journalists: Ripple, the company behind the XRP token, has decided to tackle the issue of fake volume reporting that has become prevalent in the cryptocurrency ecosystem. As a result, the company has also stressed an expected fall in sales of XRP in Q2.
In recent months, several third-party sources have called into question reported volume in digital asset markets. These reports suggest exaggerated numbers, and overall inaccuracy in the way data is reported of up to 95 percent.
Ripple is hoping to address these concerns and the questions they raise about the overall reliability of market structure and reporting at digital asset exchanges worldwide.
In doing so, the forecast for Ripple’s sales of XRP Q2 will be substantively lower – as a percentage of reported volume – than in the previous quarter.
In March, the highly cited report from Bitwise in associating with the SEC claimed exchanges inflate their trading volume to appear higher in rankings. Bitwise claimed that about 95 percent of Bitcoin exchange trading volume listed on CoinMarketCap.com is fake or noneconomic.
“It gives a fundamentally mistaken impression of the true size and nature of the Bitcoin market,” the report read.
The power of sites like Coinmarketcap.com’s power cannot be underestimated, and by extension, neither can data on trading volumes. For example, When the site removed several South Korean exchanges from its price calculations in early 2018, that resulted in a sharp decline of prices.
“If an exchange with low traffic has $300M volume and just 5 BTC in its wallet, users will be able to draw their own conclusions without the need for us to make arbitrary judgment calls on what is’ good’ or’ bad,’ “Carylyne Chan, global head of marketing at Coinmarketcap, explained to Bloomberg News their plans to offer a set of new tools to bring more transparency to trading.
XRP in the crosshairs
It is not only Bitcoin volume that has been called into question. Crypto analytics firm Messari investigated the Q4 report from Ripple at the end of last year.
The Messari investigation stated that XRP’s liquid circulating supply could be overestimated by 48 percent at the time. It put the actual market cap at $6.9 billion instead of the $13 billion reported on CoinMarketCap.
“In addition to the 59 billion XRP held on Ripple’s balance sheet… there could be significant, persistent sell-side pressure in the XRP market depending on the length and structure of selling restrictions placed on Ripple’s market-making partners, a Ripple affiliated foundation, and Ripple’s co-founders, all of which appear to have negotiated rate limits for sales based on exchange trading volume of XRP.”
Making a change
Now, Ripple is looking to address the general concerns aimed at them on reported market volume. The company admits it does not have an exact solution, but will look to take the following steps:
“We are actively working with trusted partners in the space to better understand the scope and scale of the problem,” a statement read.
“We are evaluating our approach to XRP volume reporting, including reviewing new options and requirements for sourcing market data. Additionally, we are taking a more conservative approach to XRP sales this quarter.”
The conservative approach by Ripple sees them forecasting almost half their expected target. The target of 20 basis points will likely be cut to under ten, the company said.
It will affect the short-term forecasting for Ripple, but they claim to “believe in proactive transparency” with this move.
“We hope others in the crypto ecosystem will follow our lead, and ultimately, that our joint efforts will fuel a growing level of trust, among institutions and consumers alike, and the entire digital asset market will thrive. Until we do this, we cannot expect to see wide-spread adoption of digital assets or blockchain technology,” the statement concluded.