Coinmarketcap (CMC), the web’s most popular cryptocurrency tracker website, has responded to accusations that it is implicit in supporting wash trading. This week, a platform called Crypto Exchange Ranks published detailed allegations of how CMC incentivizes exchanges to report fake volume. In a new blog post, Coinmarketcap has detailed its determination to support “transparency and clarity”.
Also read: How Coinmarketcap Incentivizes Exchanges to Report Fake Volume
Coinmarketcap Cleans Its Shop
As news.Bitcoin.com reported yesterday, Coinmarketcap has been taking flak for blindly publishing suspicious data from certain crypto exchanges. The exchange at the center of the furore on this occasion was a little-known platform called Bitforex that virtually no one had heard of until recently. Through wash trading – simultaneously buying and selling on its own platform to create the illusion of high volume – Bitforex managed to leapfrog into the top 10 according to CMC’s rankings.
Following the story, Coinmarketcap has hit back with a blog post detailing its determination to clamp down on such behavior. It identifies three issues that have been brought to its attention: fee-free/transaction mining models, low fee models, and artificial volumes/wash trading. In regards to the latter, it explains: “In order to ensure that their listings remain active on certain exchanges, sometimes projects are instructed to maintain a minimum level of volume. This causes projects to heavily employ market making services and bots to trade their own coin to inflate their volumes.” It adds:
Even though we try our best to verify the data with the exchanges on our site, we are not in the practice of censoring or policing others. In an open ecosystem like the one we are in, we believe that the best policy – that we follow closely – is to over-provide on data and let users make their own informed choices about what to do with that data.
CMC Changes Its Data Policy
Acknowledging that some entities are blatantly gaming the system, CMC goes on to explain its decision to remove minimum volume requirements for exchanges. What this means, in practice, is that platforms are not required to reach a minimum trade volume to be listed on the site. It is hoped that this will deter exchanges from inflating volume to meet CMC’s entry criteria. The site is also introducing measures such as 7-day and 30-day volume metrics that are designed to prevent the likes of Bitforex from gaming the system.
The crypto tracking website has stopped short of promising an outright ban or downgrade for exchanges that create blatantly fake volume, concluding: “Our philosophy is to provide as much information as possible to our users, so that they can form their own conclusions and interpretations – and not introduce our own bias into that mix.” As of today, Bitforex still stands at 15th place on CMC by 24-hour volume, with $138 million reported, $37 million more than Bitstamp.
Do you think Coinmarketcap’s latest measures to combat fake volume will be effective? Let us know in the comments section below.
Images courtesy of Coinmarketcap and Shutterstock.
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