CoinMarketCap.com Posts Transparency and Clarity on Wash Trading Accusations
Coinmarketcap Responds To Accusations That It Aids Wash Trading
The most popular crypto tracker of the internet, Coinmarketcap (CMC), was recently accused of implicit support of wash trading. Now, the company has decided to respond to the accusations publicly.
This week, Crypto Exchange Ranks published information that detailed allegations against Coinmarketcap and how the company incentivizes exchanges to report a fake trade volume to them. CMC responded via a blog post in which the company has affirmed that it is always transparent and that the accusations are not true.
Should a crypto project list itself on a TOP-10 exchange in terms of daily trading volume? Moreover, are these exchanges really the best on market? #CER team investigated the case of @bitforexcom – https://t.co/LBXWydTjBY
Help us reveal the truth!#crypto #blockchain
— CER Crypto Exchange Ranks (@CER_Hacken) July 16, 2018
Interesting analysis for fake volumes and inaccurate rankings for crypto exchanges. https://t.co/yL1qbmIsQ0
— CZ (not giving crypto away) (@cz_binance) July 18, 2018
The Original Accusations
Basically, the whole controversy started when Crypto Exchange Ranks claimed that Bitforex, an exchange that barely makes the top 100 by trading volume, was generating false trades on a gigantic scale. The company also said that Coinmarketcap was being complicit in this scam.
Bitforex did that by creating a fake trading volume, this is, buying and selling tokens to artificially create the impression that there is more demand, this is also known as wash trading and it is, unfortunately, very common on the cryptocurrency space.
While the whole accusation made clear that it was Bitforex and not Coinmarketcap that was falsifying the data, it also called out the tracking company for not being more eager to investigate the data that it receives. According to Crypto Exchange Ranks, CMC should know that the exchanges are falsifying data and does nothing to stop this criminal behavior that impacts the market a lot.
By wash trading a lot of tokens, Bitforex, which was barely in the top 100, managed to leap to the top 10 exchanges in the latest CMC ranking. It should be clear that the numbers do not add up and yet CMC did not do anything.
Coinmarketcap Defends Itself
CoinMarketCap stands for transparency and clarity in data, ensuring that all coins and exchanges are represented fairly. We've written a post with regards to exchange volumes and rankings, and how we plan to improve going forward. Read it here: https://t.co/CeP9mHG4d8
— CoinMarketCap (@CoinMarketCap) July 19, 2018
Following the original accusations against CMC, the company has decided to publish a blog post that you can read by clicking on the tweet. On the post, it details that the company is, indeed, compromised with clamping down this kind of behavior. According to the company, something companies are instructed to inflate trades in order to keep on the listings, which inflate the numbers.
The official response of the crypto tracker is that the company does its best to verify all the possible data but that it simply does not censor others or try to enforce policies on how they should act. CMC’s responsibility is not to prevent the exchanges from inflating numbers but to give the data to the public.
Because of this, the official stance of the company is that it is better to follow closely the exchanges and give as much data as possible so the users will be able to make best informed choices with the data. What this means is that CMC is basically washing its hands. Its function is to publish the data, not to regulate companies not to mess with it.
New Measures To Prevent Wash Trading Issues
Following this trouble, Coinmarketcap has officially announced that it would change its policy to online let exchanges with a minimum volume be listed on its platform. According to the company, the team hopes that by not being required to game the system to continue in the listing anymore, the exchanges will stop to do it.
Another measure that will be used to prevent this kind of manipulation is introducing measures for 7-day and 30-day volume metrics that will be created to prevent other cases like Bitforex’s.
However, the tracking company has clearly shown that it will not go as far as to exclude exchanges who are “breaking the rules” because they do not have actual rules. Their policy is to use the information and that’s all. If they were to form their own conclusions and interpretations, they believe that they would be putting their own bias into the equation.
This way, the results would be even less accurate than when some exchanges are gaming the system like Bitforex just did. At the moment, Bitforex was in 15th for its 24h volume on CMC.