Crypto Exchange Volumes Are Fake

Binance recently made front-page news by acquiring CMC

World-renowned exchange Binance recently closed a deal to acquired CoinMarketCap for an undisclosed price. According to Coindesk, the deal was already discussed for a few months prior but only now came to a final agreement.

CoinMarketCap is known as the go-to source for extensive data on cryptocurrency prices and exchange volumes. Lately, the company has been working on eliminating inflated volumes from its platform. This comes after Bitwise’s SEC paper which, back in 2019, revealed that an excess of 95% of exchange volumes is actually fake.

Here is a useful infographic to remind you just how severe this issue was:

The infographic prepared below by paybis illustrates the shady dealing of some of these exchanges.

Crypto Exchange Volumes Are Fake

As you can see, exchanges repeatedly presented inflated volumes to increase their rankings in CMC. The reason this happens is two-fold:

  1. CMC’s high-ranking exchanges get more attention from the public and the media
  2. Exchanges with high volumes can request higher fees for new coin listings (Altcoins, ICO’s, IEO’s). This, in turn, increases their revenue.

Thankfully, these inconsistencies were quickly dealt with, and the platform now has a lot more metrics to assess exchange volumes and popularity.

Competitors React with Mixed Emotions

Exchanges competing with Binance expressed their opinion on the successful acquisition of the latest.

The director of financial markets at OKEx, Lennix Lai, mentioned he was happy to hear that a deal of this size went through, especially given the context of an otherwise bearish crypto-market.

According to him, when big players choose to invest back into the infrastructure, the crypto industry is bound to see growth.

On the contrary, Andy Cheung, OKEx’s former COO and founder of ACDX, wasn’t as happy with the news.

The deal “is not good for the crypto industry given the difference in the parties’ agendas”, he mentioned, showing Binance’s cryptocurrency, BNB, as an example.

According to him, when an exchange of this size controls CoinMarketCap, transparency issues are bound to occur. This is especially true when looking at rankings and exchange volumes. While this statement does have a certain degree of validity, it is not reflecting the actual data of CMC up to this point – at this moment the platform is more reliable than ever before.

Other experienced entrepreneurs seem to think that the multimillion-dollar payout was more of a “favor” to ex-CEO Chez. According to them, the founder has struggled to find monetization strategies for years and was relatively inexperienced to lead such a big project.

Where are we going from here?

At the moment, CoinMarketCap seems to be gearing up for the future. While the platform is the go-to place for exchanges, institutional investors, and small-time buyers, Bitwise’s SEC report did have a negative influence on the trust towards the platform.

And with CMC being owned by one of the largest exchange platforms, objective data presentation becomes questionable. If competing exchanges feel that Binance could harvest CMC’s data, there is a high chance that these platforms will stop providing in-depth information about their platform.

After all, this data will now be given to a competitor who has the ability to monetize from it.

These issues need to be solved for the platform to survive in the long term. The crypto-industry is fatigued from such issues and, frankly, they should not even be a topic of discussion in 2020.

Future growth

Aside from the big acquisition, CMC’s new CEO Carylyne Chan mentioned that the main focus of the company is still related to reliable data presentation.

Within 2020, we are expected to see a new feature, currently labeled as “qualitative and quantitative data”. Chan also pointed out the necessity to create stronger agreements that would protect the interests of exchanges.

According to her, being neutral, transparent, and independent is in the company’s best interest.

CZ talked about CMC’s shortcomings as well, saying the company has to work on several issues and improve its product offering over time. This responsibility, however, lies with CMC’s current CEO and he chose not to dictate it.

Meanwhile, Ryan Selkis, co-founder and CEO of Messari described the acquisition as a win-win for all the parties involved.

“ [The acquisition] is great news for other crypto data companies and information businesses. Audience and influence are important. Quality data matters” he wrote in a recent Messari newsletter.

Yan Liberman of Dephi Digital believes it’s too early to draw any conclusions. However, he added that acquisitions of this time are generally good for the sector and show that the industry is maturing.

Closing remarks

What can we learn from one of the biggest acquisitions ever to happen in the crypto space? And what is its relevance to last year’s revelation of fake exchange volumes?

One thing is for certain – the crypto space is still in its infancy, but hungry to grow! Financial moves like these show that we are no longer in the “Wild West” and that the next few years will follow a more transparent and detailed model of data reporting.

Everyone is betting that Binance will stay true to their word and keep BUIDLing their way to the top. After all, crypto is nothing without its active users, without an audience of true believers.

All we can do at this point is to wait and be patient. The following year will certainly give us strong hints of CMC’s role in the Binance family.

Leave a Comment

16 − 12 =

Share