The suspicious trading volumes on cryptocurrency exchanges

Four months ago, BitForex was just one of many obscure exchanges offering users the ability to trade cryptocurrencies like Bitcoin.

Today, the Singapore-based platform is regularly reporting daily transactions that exceed $5 billion — nearly matching turnover on London’s 217-year-old stock exchange.

How did BitForex — and other startups like it — expand so quickly despite tumbling digital-asset prices and slowing activity on more established venues?

Many market participants say they suspect these fast-growing exchanges are either offering incentives that encourage users to inflate volumes, or not doing enough to stop abuse on their platforms. One red flag at BitForex: Its reported volume is by far the biggest among 219 platforms tracked by CoinMarketCap.com, despite traffic on its website amounts to a tiny fraction of most peers.

For individual investors lured to exchanges with inflated volumes, the risk is that cashing out at prevailing market rates may prove much harder…