CoinMarketCap is changing its metrics to increase data transparency and hence improve the accuracy of its cryptocurrency rankings.
Cryptocurrency rankings can be easily manipulated through various methods, including wash trading. In wash trading, a person trades against himself to generate a false trading volume that can mess up the rankings.
To make things fair and accurate, CoinMarketCap is taking a step towards better ranking methods. CoinMarketCap is set to introduce new metrics that will be launched in mid-November.
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
This is not a new problem in the cryptocurrency market. However, simple solutions to the problem would just allow such actors to find different ways to bypass the system, and hence, the problem would remain unsolved.
This caused the company to introduce a feature that did not rank any crypto among the top two hundred cryptocurrencies if they did not meet the conditions set forth in Section 10 of their methodology.
According to CoinMarketCap cryptocurrencies among the top two hundred must have “Significant liquidity/trading activity” on at least three centralized exchanges. Moreover, these exchanges must either be DATA partners or fulfill conditions that confirm its reliability. Otherwise, a cryptocurrency despite having a large market cap, cannot be listed in the top two hundred.
It was noted that trade volume pumping was used as a publicity stunt on many occasions. Simple solutions to the problem can exclude exchanges guilty of wash trading while allowing others to wash trade as they have not been found guilty yet.
So what is different about CoinMarketCap’s solution?
CoinMarketCap, on the other hand, will utilize a twenty-four hours rolling average with random time interval polling of order book depth. Moreover, CoinMarketCap will be using dynamic polling depth based on the liquidity if these cryptoassets. Therefore the system can be applied to all cryptocurrencies as it can adapt to their liquidity.