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To create a level-playing field, CoinMarketCap’s new crypto ranking system will list 200 cryptocurrencies based on the liquidity metric along with the trading volumes data.
The crypto market has been largely cluttered with improper data feeding of fake trading volumes and activities like wash trading. Thus, to bring more transparency and reduce obscurity, crypto rating service CoinMarketCap brought a new system for cryptocurrency rankings.
You've spoken, we've heard! We will be testing a change in our ranking methodology on Monday, Sept. 2, to represent all cryptoassets more fairly. Please see the full details here: https://t.co/oOFfcliqG5 😃 We look forward to your feedback!
— CoinMarketCap (@CoinMarketCap) August 30, 2019
With the new ranking methodology in place, CoinMarketCap says that “cryptoassets will have fairer representation in the ranking when comparing across all cryptoassets”. Upon testing the new system, the ranking of some coins dropped significantly failing to meet the criteria. In its new system, CoinMarketCap considers issues that weren’t taken into account initially. In the blog post last week, CoinMarketCap said:
“This new change that we will announce next Monday will fix and streamline the rankings so that all cryptoassets will be fairly represented in the rankings. This will continue to be congruent with the previously-published methodology”.
However, CoinMarketCap also noted that the new system for the liquidity evaluation of the crypto trading platforms will go live on November 12. The platforms will have the freedom to choose the data they want to submit to CoinMarket. However, their rankings will vary based on the amount and transparency of data provided. In the blog post, CoinMarketCap wrote:
“Ultimately, this liquidity metric will factor into market pairs, and will be combined with other metrics that will go into the ranking of exchanges and projects. We are continuing to refine this based on feedback, and welcome more of your thoughts too.”
It was earlier found that there was massive reporting of fake trading volumes giving a cryptocurrency undue advantage among its peers. However, with the new system, CoinMarketCap will rank 200 cryptocurrencies based on “Significant liquidity/trading activity” registered over a minimum of three crypto exchanges.
CoinMarketCap accepts the fact that ranking cryptocurrencies solely on the trading volumes, was not the right move. Thus, to create a level-laying field the platform plans to introduce a liquidity-based metric. Some of the major benefits of having a liquidity-based metric, as mentioned by CoinMarketCap, include:
- Numeric: Returns a nominal number;
- 24 Hr Rolling Average: Random time, regular interval polling of order book depth;
- Difficult to game: Dynamic polling depth based on liquidity of the cryptoasset;
- Cross Applicable: Applies to every cryptoasset as variables adapt to its liquidity.