Most altcoins are absolutely illiquid, and some are practically dead at all, according to a former principal software engineer at Microsoft.

The founder of the decentralized DIRT protocol and the former principal Microsoft software engineer Yin Yin Wu, a graduate of Stanford University and YCombinator alumnus, attempted to counteract fake trading data on cryptocurrency exchanges. Yin Wu and her team created the OpenMarketCap tracker based on the DIRT protocol that calculates price and volume using data from the world's trusted exchanges. Currently, the list includes Binance, Bittrex, Bitfinex, Bitstamp, Coinbase Pro, Kraken, Gemini, Itbit, Bitflyer, Poloniex, Liquid, DDEX, Independent Reserve.

In her blog post, Yin Wu claims that OMC, unlike CoinMarketCap, removes data from exchanges with fake volume and "is the only price tracker that gives an accurate impression of trading volume and prices."

According to OMC, the highest fake volumes have such cryptocurrencies as Ethereum Classic ($6 million of real trading volume instead of CoinMarketCap's $412 million), NEO ($9 million instead of $223 million), Litecoin ($87 million instead of $2.5 billion) and Ripple ($49 million instead of $831 million). Such a discrepancy between fake and real trading volumes leads to a suggestion that the market for most altcoins is extremely illiquid or does not exist at all, Yin Wu concludes.

According to Yin Wu, cryptocurrency exchanges deliberately use tools to fake data on trading volume in order to create an image of large trading platforms.

"Exchanges report false data for short term visibility gains at the cost of long term trust in the whole crypto space. CoinMarketCap is the most widely cited price tracker for cryptocurrency prices. Since CoinMarketCap ranks exchanges by trading volume, exchanges are incentivized to report false numbers to climb price tracker listings (and thus be featured more prominently to users)."

Earlier, BitWise Asset Management sent a report to the US Securities and Exchange Commission (SEC) stating that the volume of fake bitcoin trading reaches 95%. BitWise is one of the companies that recently filed an application to the SEC wishing to launch exchange-traded fund (ETF) tied to the bitcoin exchange rate. In the presentation sent to the SEC, BitWise notes that, based on the analysis of 81 cryptocurrency exchanges, “the real market for bitcoin is significantly smaller, more orderly, and more regulated than commonly understood. 95% of Bitcoin trading volume is fake and/or non-economic in nature.”

According to BitWise analysts, the popular statistical portal CoinMarketCap displays inaccurate data.

“Despite its widespread use, trading volume data on CoinMarketCap is inaccurate. It includes a large amount of fake and/or non-economic trading volume, thereby giving a fundamentally mistaken impression of the true size and nature of the bitcoin market.”

Thus, according to CoinMarketCap, the daily trading volume on the world cryptocurrency exchanges reaches about $6 billion, while BitWise estimates this figure at $273 million per day.

The main reason for fake statistics on trading volume is the actions of the exchanges themselves, which distort the figures of daily trading volume in order to have a field for increasing their fees for listing new tokens.