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Coinmarketcap’s First Move Under Binance Puts the Exchange top Based on Web Traffic

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Concerns about Binance’s impartiality when it comes to its acquisition of Coinmarketcap took a hit when the recent metric changes it implemented in order to try and fight fake volumes instantly catapulted the parent company to the top of the exchange ranking pile. 

What is more concerning is that the metric which is being heavily relied on to determine the rankings — web traffic — was rejected by the previous owners of Coinmarketcap. In fact, CoinMarketCap’s Chief Strategy Officer and acting CEO Carylyne Chan, said in a podcast interview late last year that web traffic was “not a good indicator.”

Traditionally, liquidity or trading volume have been better measurements to determine the value of an exchange and to position it for potential investors seeking reliable data. However, when ranked by average liquidity, Binance lands in fourth place, following Bitfinex, Coinbase Pro, and Huobi Global respectively.

A poor metric

The decision to use this new metric as the major factor in the rankings is concerning not only because it instantly puts Binance at the top of the pile with maximum possible points, it also has been outed as a poor metric for exchanges. 

As explained, Chan was asked specifically about using web traffic as a metric. She said: 

“We’ve seen other people do things like you’ve said, web traffic as a way [to verify exchanges are legitimate] but people trade using API keys so that’s why web traffic is not a good indicator.”

Yet, Coinmarketcap and its new owners are arguing against this stating: “With crypto being a retail-driven market, for an exchange to have high volumes, it needs to have a large number of retail traders (i.e. buyers and sellers). Instead of asking exchanges to submit their user numbers, a good intermediate proxy will be web traffic. As such, we have designed the Web Traffic Factor in this iteration.”

CZ admits to the issues

This decision taken by Binance and Coinmarketcap is sweeping and rather drastic, and it also leaves a lot of confusion and unsure data. However, the head of Binance has admitted that these changes are not perfect — but it does not explain why they have been made so drastically and so quickly. 

There was reported work done by Coinmarketcap to try and combat fake trading, but the new update has also removed a metric that indicated the exchange had high levels of wash trading.

Darryn Pollock
Darryn has been interested in the blockchain and cryptocurrency space since he heard about Bitcoin in 2015. He then decided to use his journalism degree to report on this fascinating fintech space in 2016, and has not looked back since.

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