CoinMarketCap.com is to bring about major changes in its method of compiling coin exchange listings as well as how exchanges make the cut for it. The driving force behind these changes is the concern within CMC and the coin exchange market itself about skewed volumes as a result of artificial bolstering, and the data that CMC uses as a result.
One of the biggest changes to be introduced is at the heart of the exchange volume listing operation – the volume requirement CMC set before it would list the exchange on its site. As of this week, CoinMarketCap has decided to scrap the entry level volume clause which it initially introduced as a filter to ensure the most popular of the exchanges were tracked.
New Fee Models can End in Skewed Volumes
CMC said this was being done for two reasons, one being to change the perception that its list was exclusively linked to exchange volume, and secondly, as a reaction to new volume-linked exchange models that have found their way into the sector recently. These included fee-free transaction mining as well as low-fee and wash trading, all of which were creating artificial volumes, and therefore skewing perceptions with regard to exchange volumes.
Fee-free transaction mining encourages users to trade back and forth with the incentive of being rebated with their own exchange coin, while low-fee models, as their name suggests, sees exchanges charging very low fees to encourage trading activity. In the wash trading, some projects are given minimum volume levels to maintain, which means these projects sometimes end up trading their own coins in order to push up their volumes. Increasingly, bots and/or market makers are used in the process of creating high exchange volumes.
In addition to changing the list entry parameters, CMC is planning other changes, including adding other metrics to its listings to help users filter volume data and take factors like volume boosting models into account. One such addition will be to include period listings covering 7 and 30 days, so that users are better able to evaluate an exchange’s volume consistency.