The update will allow the service to reflect more accurate trading volumes. The system will use three guidelines to rank trading pairs algorithmically.
In recent days, cryptocurrency market data service CoinMarketCap (CMC) activated a new ranking system that includes a confidence index. Operators use this metric as a guide to determine the accuracy of the figures supplied by cryptocurrency exchanges, often accused of inflating their trading volumes.
According to a statement by the company, the indicator covers more than 22,000 pairs of exchanges such as BTC/USD and ETH/BTC, among others, as well as more than 5,500 types of cryptocurrencies.
The three confidence bands that form the ranking are: high (over 75%), moderate (between 50% and 75%), and low (less than 50%). This ranking is determined through three aspects that include the reported volume, liquidity, and an estimate of the number of users that a cryptocurrency exchange maintains. The latter is calculated according to the web traffic of this type of entity.
CoinMarketCap explained that the indicator, shown in three bands, is based on a machine-learning algorithm. This takes into account all the data that the cryptocurrency data provider has: liquidity, order books, time, sales, and an estimated number of users by web traffic variables. These data allow determining if and to what extent the volume that cryptocurrency exchanges report for that market pair is inflated.
If a user wants to know how trustworthy Bitcoin-related businesses are, he or she must enter the CoinMarketCap website, select that cryptocurrency, and click on the tab identified as “market pairs”. After that, he or she will be able to see a list of cryptocurrency exchanges with different levels of reliability with BTC-related pairs.
To ensure that the information reflected on its website is as close to reality as possible, CoinMarketCap has applied different methods in the past. In 2019, it requested more transparency from cryptocurrency exchanges as a first step in adjusting the numbers of trading volumes.
Last November, the service announced the application of another metric, based on liquidity, to minimize the number of inflated volumes on cryptocurrency exchanges. CoinMarketCap labels this situation as a problem that has been taking place in the cryptocurrency ecosystem since 2018.
The company stated that cryptocurrency exchanges resort to offering higher figures than they have. With this, they seek to give the impression of authenticity and obtain greater visibility in the ranking produced on the Internet.
Members of the community have already questioned CoinMarketCap for spreading information that is not adjusted to market indicators. The cryptocurrency exchange Binance took this aspect into account after it acquired the service for USD 400 million in April of this year.
According to the CoinMarketCap ranking, the said cryptocurrency exchange appears as number one, according to its liquidity, and shows a level of confidence of 100%. Of course, users must complement the information that they receive from this service with other references to make better decisions.
By Alexander Salazar
