Bittrex Will Remove 82 Tokens Due to Lack of Liquidity in Small Cryptocurrencies
Bittrex, one of the largest cryptocurrency exchanges which also powers UpBit, South Korea’s second biggest exchange operated by Kakao subsidiary Dunamoo, has stated that it will remove 82 tokens from its trading platform.
“Occasionally, there are circumstances that lead Bittrex to remove a coin’s wallet or market from the Bittrex Exchange,” said the Bittrex team. “We will be removing the wallets included in the list below on March 30, 2018. Once these wallets are removed, we will no longer be able to recover these coins. Users must withdrawal their coins before March 30, 2018, in order to keep them.”The Bittrex team also stated that several cryptocurrencies have broken blockchains that have disabled users from withdrawing their balances.“The coins marked with an asterisk (*) have broken blockchains or wallets that will not allow withdrawals,” said Bittrex, referring to cryptocurrencies like CRYPT.On leading trading platforms, it is difficult for exchanges to sustain a stable order book if a cryptocurrencies does not have enough liquidity and demand from users of the platform. Lack of liquidity leads to price manipulation, which can be initiated with funds as little as $50,000, as shown in the recent study done by cryptocurrency trader Sylvain Ribes.By using a method called slippage–a process of selling $50,000 worth of a particular cryptocurrency on a trading platform to measure its impact on the price–, Ribes evaluated the liquidity of digital assets on major exchanges like OKEx and GDAX. While GDAX had a slippage of less than 1 percent, on OKEx and other cryptocurrency-only exchanges with low market cap or volume cryptocurrencies, each sale of $50,000 led to a 2 to 10 percent drop in the market value of cryptocurrencies.“A bit of wash trading and artificial volume inflation is to be expected in a thoroughly unregulated market. What I did not expect was the magnitude of the fraud,” said Ribes. “Many pairs, albeit boasting up to $5 million volumes, would cost you more than 10% in slippage, should you want to liquidate a mere $50k in assets,” he added.Wash trading and price manipulation is common on major trading platforms with small cryptocurrencies or low-volume cryptocurrency pairs. The US Securities and Exchange Commission (SEC) recently warned investors against pump and dump schemes that are often seen in the cryptocurrency market.“Fraudsters often try to use the lure of new and emerging technologies to convince potential victims to invest their money in scams. These frauds include ‘pump-and-dump’ and market manipulation schemes involving publicly traded companies that claim to provide exposure to these new technologies,” SEC’s statement read.
Earlier this month, the SEC requested cryptocurrency exchanges to either de-list ICO tokens or register with the agency in order to continue providing support for tokens. For US-based cryptocurrency exchanges like Bittrex, it is mandatory to register with the SEC before processing trades involving tokens.
Throughout next few months, many major exchanges will likely de-list or remove small cryptocurrencies that are prone to pump and dump schemes, and market manipulation.