CoinGecko Crypto Market Data Aggregator’s New Exchange ‘Trust Score’ to Fight Volume Fraud Launches
Cryptocurrency market aggregator CoinGecko, on May 13 unveiled its latest ‘’trust score’’ for its system ranking exchanges. CoinGecko’s co-founder Bobby Ong expressed optimism that the score will be of immense help in an effort to achieve a fairer picture of the cryptocurrency markets.
The score will use a combination of analytical methods to analyze the market situation, while also combining online traffic analysis by SimilarWeb and the trading volume of median’ users from 10 exchanges that have trustworthy reported volume.
This latest method will look at the analysis as indicated by a report by Bitwise for the U.S Securities and Exchange Commission. The details of the report which was published in March revealed that 95% of the reported volume on the market is fake, and only about 10 exchanges really show the real volume of trading on their platform, with Binance, Coinbase, and Kraken taking the lead in such respect.
This latest move will give CoinGecko the opportunity to calculate the average daily user trading volume for each exchange while comparing it with the median number for the 10 exchanges deemed to be reporting by Bitwise. Consequently, if the volume is somehow lower than the benchmark, it means the reports of the numbers are fair, but if it’s higher than the benchmark, the co-founder of CoinGecko Bobby Ong said that the firm will have to
‘’normalize their volume downwards by multiplying their daily Similarweb traffic estimate against the benchmark’’.
Analyze Exchange Order
The crypto market aggregator will also be analyzing exchanges’ order books measuring the bid/ask spread (the difference between the buy and sell prices, while looking at the capital requirement in order to move the order book by 2%. Commenting on the latest development, Ong explained that:
‘’A thick order book will show that there is more liquidity for any trader to come in and buy/sell without much slippage or without affecting the price too much and is a relatively good indicator of liquidity (for now). A thin order book will show that there is no liquidity for any trader to trade meaningfully.’’
With the latest ‘’trust score’’, CoinGecko will be combining the volume, web traffic, and order book analysis, with three color-coded categories: green (good), yellow (fair) and then red (poor). Ong also explained that with the trust score, the algorithm prioritizes exchanges with tight spread and deep depth, rather than reported trading volume.
CoinGecko is adamant in filling some of the loopholes in the cryptocurrency market. A report by Bitcoin Exchange Guide in November 2018 revealed the effort that CoinGecko is taking to improve transparency and communication in the crypto industry. CoinGecko collaborated with 12 exchange platforms and 87 blockchain project to develop Beam.
The Beam will act as a communication media for all parties in the cryptocurrency and blockchain industry. The application will also allow administrators of cryptocurrency trading platforms and blockchain projects communicate directly with the members of the crypto community.