Currently, there has been growing concerns regarding the cryptocurrency exchanges reporting fake trading volumes to maintain the euphoria in the market and to stay ahead in the ranking. A recent post by CryptoExchangeRankings exposes how the new exchanges have successfully managed to move up their rankings on the popular cryptocurrency data aggregator and trader website CoinMarketCap (CMC).
The blog post mentiones:
“The issue of fake volumes on crypto exchanges is like a UFO: some people claim to witness it, but there is no evidence and metrics to prove its existence.”
In response to this, CoinMarketCap has considered taking some action by removing the minimum volume requirements for exchanges citing “concerns” over the transparency and the fake volume figures:
“We understand that these concerns are valid and have implications on the community and the impressions that people have about exchanges, even more than we are traditionally used to.”
In an official blog post last Thursday, July 19, CoinMarketCap introduced new policy ” to filter for more popular exchanges that could be listed on CoinMarketCap.” The data aggregator also says that it will bring new filters and raking metrics giving users “the power to experience and use the data in a way that fits their needs most.”
In a war towards pulling more traders/investors to its platform, cryptocurrency exchanges are using a new model famously referred to as “transaction mining” which is a volume-boosting scheme. In this model exchanges technically charge transaction fees later returning them in the form of their native digital tokens. Crypto Exchanges have been accused of using these low fees and wash trading tactics that ultimately result in high-trade volumes appearing on the CMC’s website.
CoinMarketCap says that instead of censoring such websites, it will instead attempt to over-provide on tools and data giving individuals the ability to analyze it at their end and make informed decisions. CMC wrote:
“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.”
While commenting on this, CMC’s vice president of marketing Carylyne Chan wrote:
“While we have a relationship with most of the exchanges listed on our site, there is no guarantee that any of them will respond or comply to any specific guidelines, but we have to continue showing users the best approximation of price and volume based on all the data we have available. The evolution of new models such as transaction mining also means that there needs to be new ways to account for volume. Compounding it is the fact that they are, in fact, enabling greater liquidity in the way that users are trading more readily on the platforms.”
Chan also further noted that CMC’s model of data aggregation is based on the data sent to it by exchanges and then the number on the site reflects “the best approximation of price and volume based on all the data we have available.” She further explained that “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.” However, she also added that “we understand that these concerns are valid and have implications on the community and the impressions that people have about exchanges, even more than we are traditionally used to.”
“Again, we want to state that 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. It is an extremely demanding problem that requires all our stakeholders in the cryptocurrency community to solve,” wrote the company concluding the blog post.