The word ‘scam’ has become very common in the crypto world due to an increasing number of scam-projects that have appeared on the market over time. Scammers want easy money; therefore, they come up with attractive ideas, like faking the trading volume or creating some kind of conditional token or concomitant token sales. They attract potential investors promising them a fortune. As a result, scam-project developers collect an impressive amount of money, list their scammed tokens on exchanges to make twice the profit on the venture, and then … disappear. Consequently, small investors who believe in the long-term success of these projects, especially newcomers to the cryptocurrency market, fail to make a profitable investment and end up with nothing.
Crypto exchanges are the fundamental institutions in the crypto economy. Thus, they must filter all the scam projects not to endanger investors that trade on them. If an exchange does not do so, it would experience a negative effect on its reputation and operation processes. The more scam coins an exchange lists, the more notorious reputation it has and fewer development prospects attracts.
It’s important for crypto exchanges to filter out scam-coins from their portfolios. This can be done either by preliminary audits or by delisting the coin (token) once it becomes obvious that the coin is a scam. If crypto exchanges constantly list scam coins, their users lose money by buying these “assets”. Eventually, this can lead to losing confidence in the exchange among the users, causing organic activity to fall and the possibility of closing down.
In this research, we analyze which exchanges list the highest number of scam-coins, taking a closer look at one of the most dubious exchanges — Cryptopia.
List of TOP Scam Coins with Exchanges
Some sources (coinscamlist, deadcoins, scamcoins, etc) provide lists of dead scam coins as well as exchanges on which they are listed. Having analyzed and reviewed such coins, we’ve ranked them by daily trade volume and added the information about crypto exchanges where they are traded most actively (Table 1).
By analyzing the table, we can see that Cryptopia is the leader among the exchanges that host scams, followed by CoinExchange and CryptoBridge.
What is Cryptopia?
Cryptopia is a popular New Zealand-based crypto exchange founded in 2014 by local businessmen Adam Clarke and Rob Dawson. The company operating the exchange and its website, Cryptopia Ltd, is also based in New Zealand.
In the initial stages, Cryptopia was a mining pool. The exchange appeared a little later.
The platform gained popularity in the second half of 2017 amid the rapid growth of the cryptocurrency market (the site cryptopia.co.nz started working in full in December 2014). Cryptopia specializes on low-cap altcoins and offers almost the largest choice of positions for trades in the crypto world. As of mid-September 2018, the exchange supports 583 coins/tokens (687 active markets according to CMC). As early as March 2018, the total number of Cryptopia customers exceeded 1.5 mln.
Analysis of Trading Activity on Cryptopia
The trade volume of BTC, ETH, and LTC is just 20% of total 24h trade volume.
The remaining coins (the majority) arouse suspicion being traded only on Cryptopia and some other crypto exchanges that lack credibility (like CoinExchange and CryptoBridge).
Check it out: Look at TerraNova coin chart on Cryptopia. Is there any correlation between price and trade volume?
LGS/BTC pair took up 15% of total daily trade volume on Cryptopia. Logis coin (LGS) is suspicious not only because of its spikes in volumes (Fig. 2-3) but also because of its trading division on CCC exchanges (Cryptopia, CryptoBridge, CoinExchange), according to CoinMarketCap (Fig. 4).
These charts show us the uncorrelated price and trade volume indicators of the top traded coins on Cryptopia exchange.
There are all sorts of examples like those described above. Collecting the data from open sources about scam coins, we created a list of Top-10 crypto exchanges, which list scam coins (Table 2).
How Cryptopia’s performance changed over time
Daily Trading Volume
Unfortunately, we don’t have a continuous graph that represents daily trading volume for the past 12 months, but we have discrete data points that clearly illustrate the trend. We have collected a couple of public articles that clearly state “24-hour trading volume” figures at certain periods of time:
- “At Cryptopia, you have the total 24-hour volume at about $16m currently” (article link) Date of post – January 15, 2018
CoinMarketCap ranks the exchange in the low 70’s with about US $7 million in daily trading volume. (source) June 2018
- As of September 18, 2018, the 24-hour trading volume of Cryptopia $3,988,726 (CoinMarketCap data) ranked 84th among crypto exchanges.
It’s also appropriate to note that CoinMarketCap ranked Cryptopia 52 (source) on June 15th, 2017 in terms of total market volume among exchanges over a 24-hour period. Today, Cryptopia ranks 84th.
As you can see, there is a clear trend demonstrating that trading volume on Cryptopia is steadily decreasing in 2018. We assume that it’s been caused by the fact that the exchange had listed coins without precise requirements and checks. As a result, there are too many scam coins listed on Cryptopia that negatively affects the liquidity of the exchange.
Scam-Coins on Cryptopia with the decreasing liquidity
Here are a couple of examples from CoinMarketCap:
As you can see from our table 1, all the scam-coins listed above are mainly (more than 50%) listed on Cryptopia.
As scam-coins die, trading volume decreases, undermining trust in the exchange as users lose money.
Cryptopia is mainly altcoins
Comparing the portfolio of Cryptopia with Houbi exchange, we can see how different they are in terms of “Volume by the market pair”:
Cryptopia on CoinGecko
As you can see, Cryptopia is trading mostly “others” (various altcoins) instead of traditional pairs like ETH/BTC or LTC/BTC.
CoinGecko indicates that on Huobi main pairs are BTC/USDT or ETH/ USDT (Fig.6)
Average users actually prefer trading regular pairs like BTC/USD or ETH/USD etc. Thus, listing many altcoins is suspicious, implying that scam-coins may take up a significant portion of the trading volume.
Overall website traffic
We have already assumed that listing scam coins is the reason for organic engagement drops. We decided to analyze daily website traffic of Cryptopia using Similarweb to check our theory.Total daily traffic has fallen by more than 35%, since June 2018. The negative trend is consistent in both site visits and daily volume trade, which informs our conclusion — users are LEAVING Cryptopia due to the doubtful listing strategy applied by the exchange — vast availability of scam coins.
The CER team actively encourages exchanges to pay more attention to listing requirements and analysis of projects which apply for listing. We believe that it will significantly reduce the number of scam projects existing on the market, positively affect the safety and profitability of investments, and improve the image of the whole industry.
Cryptopia is the leader in listing scam-coins, but there is a list of other crypto exchanges (second- and third-line ones), which allow users to trade junk crypto assets. Why is this happening? Because Cryptopia combines a user-friendly interface, low fees, and opportunity to add new coins, creating a perfect platform for altcoin trading.
Fraud, scam-coins, fake volumes, and deceptions. These words perfectly characterize today’s crypto world. Stay with us to learn everything you need to know about the dark side of the crypto economy.
Don’t hesitate to contact us via firstname.lastname@example.org, if you have suggestions on how to make these reviews more interesting and effective.