CoinMarketCap Admits Fake Crypto Volume Allegations, Plans for a New Set of Tools

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by Teuta Franjkovic · 4 min read
CoinMarketCap Admits Fake Crypto Volume Allegations, Plans for a New Set of Tools
Photo: Coinspeaker

Crypto price aggregator CoinMarketCap says it plans to make a number of changes to address concerns that the site reports fake volume for Bitcoin, Ethereum, XRP and more than 2,000 altcoins.

At CoinSpeaker, we have already reported of how this influential site was called out by crypto index and beta fund provider Bitwise in a report they have submitted to the SEC. Bitwise said its research shows that about 95% of the volume reported on CoinMarketCap is fake. They said:

“Despite its widespread use, the data is wrong. It includes a large amount of fake and/or non-economic trading volume, thereby giving a fundamentally mistaken impression of the true size and nature of the bitcoin market.

We will demonstrate in multiple different ways that approximately 95% of this volume is fake and/or non-economic in nature, and that the real market for bitcoin is significantly smaller, more orderly, and more regulated than commonly understood.”

CoinMarketCap responded by stating that concerns over inaccuracies “were valid” and that it would be adding more data for its users to make better decisions.

They tweeted:

CoinMarketCap reports approximately $6 billion per day in Bitcoin trading volume, but the actual figure is $273 million, or roughly 4.5% of the reported amount, according to Bitwise.

Bitwise reported its data and claims to the United States Securities and Exchange Commission (SEC) as part of a proposed rule change for its application to launch a Bitcoin Exchange Traded Fund (ETF).

The analysis opens with the argument that while an ostensible. It says $6 billion in daily traded volume for Bitcoin is reported across the spot markets.

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From the company, they said they are planning to offer a set of new tools to bring more transparency to trading.

In the email they’ve sent to Bloomberg, Carylyne Chan, global head of marketing at the site, said that they are planning to include liquidity measures, hot and cold wallet balances and traffic data for listed exchanges:

“For instance, if an exchange with low traffic has $300M volume and just 5 BTC in its wallet, users will be able to draw their own conclusions without the need for us to make arbitrary judgment calls on what is ’good’ or ’bad’. 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.”

Chan also added that the coming changes will be the latest in a series of updates designed to address concerns of inaccurate volume. The site has been working to combat concerns for months, citing fee-free/transaction mining models, low-fee models and artificial volumes generated by wash trading. The company says the goal is to prevent traders and bots from sending crypto back and forth, at no cost, corrupting the data.

In July of last year, they issued a statement that it was going to address volume concerns. At that time it introduced a number of changes and remove a volume requirement for new exchanges.

They then said:

“Previously, we had volume requirements for exchanges in order to filter for more popular exchanges that could be listed on CoinMarketCap. It was a necessary but not sufficient requirement, since we receive hundreds to thousands of requests a day to list new exchanges and coins.

This was not meant, in any way, for us to introduce censorship, but rather for us to use a simple and easy-to-understand criteria for exchanges to figure out what they need to be on CoinMarketCap. Due to the recent changes in the exchange landscape, and the concerns aired by our community, we have removed the volume requirement for exchanges.”

CMC had previously caught the attention of crypto figures after previous research from trading platform The Tie likewise cast the spotlight on exchanges’ reported volumes.

Specifically, Changpeng Zhao, CEO of Binance, argued a coin climbing the site’s rankings alienated experienced investors, who would automatically assume its size was suspect.

He tweeted:

What new metrics would you like to see on the CoinMarketCap? Share with us!

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