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Crypto exchange volume data is becoming more reliable — but it’s still far from perfect

Crypto exchange volume data is becoming more reliable — but it’s still far from perfect

The Blockchain Transparency Institute, or BTI, has printed its market knowledge integrity report for 2020. This report discovered a threefold enchancment within the high quality of information on veteran crypto rankings website, CoinMarketCap. 

“Solely 31% of the [CoinMarketCap] high 25 is being wash traded in comparison with over 90% simply 1 yr in the past, a 3x enchancment with their new rankings system,” the report states. 

Analysis for the report was compiled as a part of “BTI Verified,” an initiative launched by BTI to investigate the issue of crypto trade knowledge being distorted by wash buying and selling. 

Regardless of the advance over the previous yr, CMC was ranked 4th within the report’s evaluation of main crypto knowledge websites — behind opponents reminiscent of Nomics, Coingecko and CryptoCompare.

“eight main wash buying and selling exchanges nonetheless discovered on the present CMC high 25 have discovered a solution to beat the brand new rating system by faking orderbook liquidity, utilizing ghost trades, and buying net visits,” BTI Verified claimed.

In response to the report’s findings, Gerald Chee, head of analysis at CoinMarketCap, argued that CoinMarketCap’s outstanding standing within the business has spurred exchanges to tailor their knowledge manipulation methods to its programs:

“We’re the biggest knowledge aggregator within the crypto area, and exchanges will strive their absolute best to recreation our rating programs – however not our opponents. This can be a purpose why our rankings are persistently gamed. Consider it within the website positioning recreation. Hardly anybody tries to recreation their ranks on Bing, however everybody tries to get high rank on Google.”

Chee clarified CMC’s strategy to tackling the false reporting of buying and selling volumes on exchanges. 

First, he stated that it’s “technically unattainable for any knowledge aggregator or supplier to detect wash buying and selling from the skin,” noting that knowledge websites “are all shoppers of exchanges’ API knowledge.”

To take action would require “account buying and selling knowledge to create a graph mannequin that will reveal how trades are executed and purposefully detect wash trades,” he stated.

Nonetheless, CMC’s mannequin makes an attempt to detect outliers by evaluating net visitors knowledge and liquidity. In different phrases, it appears to be like to detect whether or not there seems to be “an excessive amount of quantity” for too few customers or “too little” liquidity. This technique, Chee claimed, sufficiently detects outliers “in no less than 80% of exchanges or market pairs.”

BTI Verified’s report attributes the advance in crypto knowledge websites’ accuracy to new particular person pair rankings — but it underscores that trade market makers have already discovered methods to control these metrics. 

The report credit CMC’s inclusion of net visitors and liquidity metrics, in addition to confidence scores, with contributing to its trade rankings “trying a lot better than they had been a yr in the past.”

Nonetheless, BTI Verified claims that any trade should buy net visitors and use ghost orders as a way to trick liquidity metrics. This might allow some exchanges to proceed faking their means into CMC’s high rankings. The report notes that such practices are prone to proceed until knowledge websites’ methodologies are improved.

Chee informed Cointelegraph that CMC tries to keep away from “subjective biases in our methodology,” which means the location refrains from purposefully “marking down” a given trade. 

Notably, two well-known exchanges, OKEx and Huobi — every of which report excessive liquidity and a excessive variety of distinctive guests —  had their reported quantity lowered by 52% and 84% respectively by CMC competitor Coingecko utilizing its “quantity normalization” algorithm. They obtained a C ranking from Nomics’ knowledge transparency 

Not like different websites, who analyze knowledge transparency and assign a low ranking the place relevant, CMC considers the transparency of API to be a “subjective exclusion technique.” Chee stated:

“We consider that [transparency of API] isn’t a superb indicator for wash buying and selling detection. An trade can present a variety of “clear” data concerning their buying and selling knowledge, but make use of bots to execute many of the trades internally.”

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