Coinmarketcap (CMC) is a website for tracking market capitalization of various cryptocurrencies. The website aggregates prices of cryptocurrencies and calculate price averages that are then displayed to users.
However, the site has recently found itself responding to accusations that it is implicit in supporting wash trading. Sometime this week, Crypto Exchange Ranks, a platform released detailed allegations of how CMC encourages exchanges to report fake volume. In its latest blog post, CMC noted that it’s determined to support “transparency and clarity”.
According to reports, Coinmarketcap has been criticized for blindly publishing suspicious data from certain crypto exchanges. Virtually unknown Bitforex is one of the exchanges that no one ever heard of until recently. Through wash trading, its own buying and selling for the purpose of creating the illusion of high volume sales, Bitforex managed to get into the coveted top 10 list of exchanges thanks to CMC’s rankings.
CMC has responded with a blog post detailing its determination to suppress such actions. It identifies up to three problems that have been brought to its attention, namely: fee-free/transaction mining models, low fee models, and artificial volumes/wash trading.
The blog post explains that “In order to ensure that their listings remain active on certain exchanges, sometimes projects are instructed to maintain a minimum level of volume. This causes projects to heavily employ market making services and bots to trade their own coin to inflate their volumes.” In addition to that, it also said, “Even though we try our best to verify the data with the exchange on our site, we are not in the practice of censoring or policing others. In an open ecosystem like the one we are in, we believe that the best – that we follow closely – is to over-provide on data and let users make their own informed choices about what to do with that data.”
After realizing that some entities may publicly be playing with the system, CMC went on to explain its decision to remove minimum volume requirements for exchanges. This will mean that in practice, platforms are not required to reach a minimum trade volume to be listed on the site.
The site is also introducing measures like a 7-day and 30-day volume metrics that are designed to prevent the likes of Bitforex from meddling with the system. While it stopped short of promising an outright ban or downgrades for exchanges that report fake volumes, CMC says that it is its philosophy to provide as much information as possible to its users, “so that they can form their own conclusions and interpretations – and not introduce our own bias into that mix.”