Isn't it very easy to fake market depth?
How? If you put in "fake" bids/asks they can still get matched, and if you cancel them then the "fake" market depth is no longer there and trading stops
If you are talking about a small or new asset, what is to stop me from creating it then populating the exchange with orders that I both buy and sell with various idents? Those trades would really happen, and my only cost would be the tx fees. At the point the market bootstraps, I win! my asset is trading at the expense of others. If I fail what did it cost me besides the tx fees?
How is this at the expense of others? Also you need depth, not volume, so you could only bootstrap an asset if you had enough total % of stake.
In a very basic penny trade operation, what really happens is a group of people hold maximum of the security. So they can create a market depth and trade within themselves raising the price at the expense of others.
Example assume security currently at 0.001 BTS. A total of 6 people hold majority of the security - x,y,z,a,b,c with say 100 bts between them.
So what they do is - x sells to y sells to z sells to a sells to b sells to c sells to x..... with each increasing tick of 0.0001 bts. Same bts can be circulated and reused to do another buy operation.
Now for a causal observer it is increasing prices = profit so many people will start to jump in. So while the cost will not "only" be the fees but once it is picked up by market, I can slowly unload my shares and run away.