CoinMarketCap against manipulation of metrics by measuring Liquidity

  • CoinMarketCap, the cryptocurrency data platform, will measure the liquidity of exchanges.
  • The platform is undergoing a process of expansion and renewal of its services.

The adoption of Bitcoin has shown to be on the rise. This conclusion, as reported by CNF, was made through data published by Coindance. In that sense, another relevant data platform renews its metrics system. CoinmarketCap will seek to better account for the state of the market and fight against manipulation.

CoinMarketCap will measure Liquidity on trading platforms

In any market, the data and procedures used to measure its dynamics are important. CoinMarketCap is one of the leading sites in this field. However, its trajectory has not been without controversy.

Earlier this year, CoinMarketCap came under severe criticism. The main objector of its practices was Bitwise. The data collection platform was accused of manipulating data and having inaccurate measures.

Since then, CoinMarketCap has made adjustments to its measurement system. The most recent and important was announced during an event in Singapore, hosted by the data site, called “The Capital”. There, a new tool was launched. It would measure the Liquidity of more than 3000 cryptoassets.

As mentioned above, the tool is intended to be more precise in its measurement and to improve the accuracy of the data offered by the platform. In the words of the company’s Chief Strategy Officer, Carylyne Chan:

The adaptive methodology will make the Liquidity metric very difficult to “game” as orders would need to be placed close to the mid-price, or risk being counter-productive to the Liquidity metric scoring.

Volume will no longer be important as a metric

In the accusations made against CoinMarket, it was argued that Volume is an easy metric to manipulate. This was recognized by Chan and applied to the new metric that will take data from various exchanges:

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Our new metric will focus on what matters most to investors and traders: liquidity. With our Liquidity metric, we hope to provide public good to the crypto markets by encouraging the provision of liquidity instead of the inflation of volumes.

If successful, the new metric could displace volume in market valuation. In addition to this new initiative, CoinMarketCap announced the launch of a page on which works can be published. For this, it is necessary to pay a fee.

The measurement firm has also expanded the range of languages supported by its mobile application and plans to collaborate with Yahoo Finance in the near future.

While the tool is being used, time will tell if CoinmarketCap’s new metric will be able to make a place for itself in the market as a relevant indicator.

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About Author

Reynaldo Marquez has closely followed the growth of Bitcoin and blockchain technology since 2016. He has since worked as a columnist on crypto coins covering advances, falls and rises in the market, bifurcations and developments. He believes that crypto coins and blockchain technology will have a great positive impact on people's lives.

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