Coinmarketcap's Data Problem

June 9, 2020 11:17 AM
Coinmarketcap's confidence factor is highly flawed and prone to manipulation.
Coinmarket's data has been criticized in the past
Crytpo and Bitcoin Market Cap Story of Day






Crypto is unchanged this morning with none of the Top 5 up or down more than 1%. Spot volumes are about as low as they have been in months with 24-hour activity 50% of a fast-declining 30-day average.


Coinmarketcap released a new calculation for volume last week. Binance, which acquired the firm in April, has seen some bad press suggesting they’re manipulating activity rankings to support their interest. While we’ve not necessarily seen evidence of that, we think the new “confidence” factor remains highly flawed, prone to manipulation, and does little to add more transparency to crypto liquidity

In April, Binance, arguably the world's most active crypto/crypto exchange, bought Coinmarketcap, the most visited site in crypto according to Alexa rankings, for $400 million. While being a highly popular destination for traders, Coinmarketcap has long been criticized for mostly garbage data.

When Binance bought the platform, they portrayed the decision as one with the aim to leverage Coinmarketcap's popularity but add more credibility to the platform. Skeptics immediately commented that the purchase would only serve to push more users to Binance's exchange, potentially through the manipulation of data.

CoinDesk released an article this week noting some outcry from commentators after Coinmarketcap made changes to methodologies that resulted in Binance being listed as the most active exchange. The change added a confidence factor that uses web traffic as another check against exchanges claimed volumes. Binance suggests the introduction of this factor helps monitor those exchanges who 1) simply report fake volumes and 2) use bots to wash trade.

We've never found the idea that Binance has had some of the most active pairs in crypto for the last 2-years as controversial. The exchange, in our experience, functions as you would expect and interactions with the platform are typical of those with deep order books. That said, we don’t think that this web traffic confidence factor will be much use. First, it favors exchanges that are focused on smaller retail traders as opposed to those that attract larger traders and would as a result have less total site visits. Second, web traffic figures are arguably just as easy to fake/manipulate as volume figures. Ultimately, while we have yet to see evidence that Binance is using their purchase of Coinmarketcap to benefit their interest, we also don't believe that their methodology changes have done anything to improve problematic volume statistics.




About the Author

FRNT Financial is a technology and sales layer that offers institutional and accredited investors access to various forms of exposure to crypto-assets. You can subscribe to FRNT Financial Morning Note at