Crypto data tracker wants to fight fake trading volume
(Bloomberg) --One of the leading data tracking services for cryptocurrencies has come up with a new metric that it says will better reflect real trading activity in an industry notorious for suspect volume figures.
CoinMarketCap’s Liquidity metric went live Tuesday, and will serve as the default barometer for ranking currency pairs and exchanges on the website, it said in a statement. The new metric draws on a wide range of factors such as order sizes and distance from the mid price. Calculations are made by polling the market pair at random intervals over a 24-hour period and averaging the result, which is measured in dollars.
CoinMarketCap, which was founded in 2013 and is one of the top sites for tracking crypto prices, hopes this methodology will help users better identify the most liquid markets for the more than 3,000 crypto assets listed on its website.
For one thing, an order that deviates significantly from the mid price on a marketplace is likely to be placed by the exchange operator itself to boost volumes, and thereby will be given a much lesser weighting when producing the Liquidity scoring, according to CoinMarketCap Chief Strategy Officer Carylyne Chan.
“When people are inflating their volumes, they are basically inserting orders into the order book, so they buy and sell to themselves,” Chan said in a phone interview. “What we are trying to do here is to counter that.”
The divergence is obvious. When it comes to reported volume, Singapore-based platform CoinBene was the top ranking exchange during the 24 hours through 7pm local time on Nov. 10, with $1.2 billion worth of trades, according to data provided by CoinMarketCap. But when using the Liquidity metric, Malta-based Binance was the No.1 exchange during the same period, with just half of the reported trades.
Crypto exchanges are generally subject to much less oversight compared with bourse peers in traditional assets. In a report to the U.S. Securities and Exchange Commission in March, fund manager Bitwise asserted that 95% of all Bitcoin trading volume tracked by CoinMarketCap is fake.