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CoinMarketCap Says Its New Metric Will Combat Fake Trade Volumes on Exchanges

Online cryptocurrency data tracking platform, CoinMarketCap (CMC) has introduced a new feature to combat fake trading volume on exchanges, according to a Wednesday report by Bloomberg.

CoinMarketCap set up a Liquidity metric to better reflect real trading activities in the crypto industry, while also operating as a default barometer for ranking exchanges and currency pairs on its website. The new feature is aimed at helping users to identify the most liquid markets for over 3,000 crypto assets listed on its website.

Carylyne Chan, CoinMarketCap Chief Strategy Officer, noted that orders deviate significantly from the mid-price on a marketplace due to manipulation by exchange operators in order to boost volumes. She explained that the new metric should do just enough to counter that illegal practice, saying in the report,

When people are inflating their volumes, they are basically inserting orders into the order book, so they buy and sell to themselves. […] What we are trying to do here is to counter that.

With the release today, exchanges that manipulate trading volumes are likely to get much lesser weighting when producing the Liquidity scoring.

The new metric, which went live on November 12, draws on much information, including the order sizes and distance from the mid-price. It will calculate by polling the market pair at random intervals daily, afterward, average the result in dollars.

CMC also noted that the new metric could be relied on. A typical instance is the Singapore-based crypto platform CoinBene, which topped other exchanges with $1.2 billion worth of trades, throughout November 10. However, the Liquidity metric indicated that the popular crypto exchange, Binance was the No.1 during that same time, with just half of the reported trades.

Meanwhile, the latest move by CoinMarketCap evidently is the fulfillment of a promise made in March by the market data provider to provide more accurate information to users concerning the activities of crypto exchanges.


Featured Image via CMC Liquidity Metric

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