Leading cryptocurrency data and indices provider CryptoCompare has today launched its new Cryptocurrency Exchange Benchmark.
In response to growing concerns around ‘fake volume’ and the accuracy of information coming from crypto exchanges, the new product ranks over 100 spot exchanges in an effort to provide users with granular, reliable data on the best trading platforms regardless of their reported volumes.
Using data for the month of May 2019, the report ranks exchanges according to seven criteria: geography; legal/regulatory; investment; team/company; data provision; trade surveillance; and market quality - using publicly available information.
The report reveals that the top 10 most trusted exchanges are (in order): Coinbase, Poloniex, Bitstamp, bitFlyer, Liquid, itBit, Kraken, Binance, Gemini and Bithumb.
Growing Concern Over Data Reliability
Concerns have been mounting in recent months with respect to the validity of figures reported by exchanges and the dubious practices used to inflate trading volumes - including wash trading and incentivised trading schemes. Some analysts believe exchanges are inflating volumes to gain status and climb rankings on sites such as CoinMarketCap in order to charge token projects listing fees.
The report found that low quality exchanges - ranked C-F by CryptoCompare - have actually seen their market share increase by 30% in the last 12 months, indicating that the ‘fake volume’ problem’ is in fact getting worse.
The narrative came most prominently to the fore this year in March with the release of a study conducted by Bitwise Asset Management which claimed that 95% of reported bitcoin trading was in fact “fake.” As a result, demand has been growing for accurate and reliable metrics with which to assess global crypto exchanges.
In order to circumvent the problems associated with aggregate volume data, the product uses alternative metrics - such as the correlation of volume to volatility and the standard deviation of volume - to highlight when exchanges appear to be artificially generating volume. On more trustworthy exchanges, volume correlates far more closely with volatility (as would be expected), whereas those with a low or negative correlation between the two, are highlighted as more suspicious.
Charles Hayter, Co-Founder and CEO of CryptoCompare, explained the goals of the new product:
In response to industry concerns over inflated volumes and the lack of reliable metrics for assessing cryptocurrency exchanges, we are excited to launch the CryptoCompare Exchange Benchmark. We look forward to bringing greater transparency to the digital asset class and improving decision-making for market participants by providing a dataset they can trust.
Gabor Gurbacs, Director of Digital Asset Strategy at VanEck, the company (jointly) behind a highly-anticipated Bitcoin ETF application, added that:
This is a breakthrough report that will foster transparency and support operational, regulatory and business best practices among crypto trading platforms.