“On Monday 2 September 2019, we will announce that we are changing our ranking methodology. The goal is to ensure that crypto assets are more fairly represented in the rankings compared to each other in the crypto asset market,” CoinMarketCap recently stated.
The company that ranks cryptocurrencies and crypto exchanges has therefore decided to make changes to its rankings. It will no longer use the metrics it has relied on so far. The aim is to provide a more transparent ranking. CoinMarketCap has long been criticised for its volume-based rankings. Therefore, it was important to address the allegations of fake volumes and wash trading with a new method.
95% of Bitcoin trading volumes on CoinMarketCap are alleged to be fake
Bitwise reportedly published a study this year showing that 95% of Bitcoin trading volumes are fake. In a presentation to the SEC, Bitwise explained that there are several ways to influence trading volumes. “Despite the fact that CoinMarketCap.com’s data is inaccurate,” Bitwise explained.
“The company takes into account a large number of false and/or uneconomic trading volumes. Thus, it fundamentally misrepresents the true size and nature of the Bitcoin market. Approximately 95% of the volume [in this market] is fake and/or uneconomic in nature. The real Bitcoin market is much smaller, more orderly and better regulated than is commonly believed,” the presentation states.
The criticism of CoinMarketCap mainly concerns the lack of attention to liquidity in the ranking of cryptocurrencies and exchange platforms. As a result, CoinMarketCap is now introducing new rules and measures. This will allow them to take liquidity and much more into account when compiling their rankings.