(Re)Hypothetically Speaking

The Nexus Between Competitive DDR And CMC Rankings

In May 2013, Brandon Chez launched a side project to little fanfare. At the time, there was no easy way to rank the growing number of cryptoassets. Inspired by how TradFi measured the market capitalization of equities, Brandon built a simple site to rank cryptoassets - that site would become known as CoinMarketCap.

The result was reminiscent of the leaderboards that he had created for rhythm games to track top scores globally. As one of the top DDR (Dance Dance Revolution) players in the US, competitive integrity was embedded in CMC's DNA. It was thus only natural that CMC's competitive DDR lineage (embodied by OGs like Brandon and Luke) extended to how it approached its market cap rankings. Over the years, CMC has developed a reputation for being more rigorous than its competitors in its market cap verification process due to rank implications, especially in a space where there are perverse incentives to inflate vanity metrics.

The Challenges of Tracking Rehypothecated Cryptoassets

Fast forward to the present. What started out as a side project has metamorphosed into the veritable 'home of crypto'. With 600M monthly page views and 50M unique visitors, CMC now has a reach that eclipses the likes of Bloomberg, Reuters, CNBC, and WSJ.

Although much has changed at CMC, the northstars of (i) UX and (ii) rigor (aka competitive integrity) have remained constant. The emergence of rehypothecated assets have thus created a conundrum, as it presents the issues of (1) 'repetitive content (UX)' and (2) 'double-counting (accuracy)'.

Repetitive content (UX)

This refers to multiple instances of the same asset that are rehypothecated (e.g. restaked, staked, or wrapped) by intermediaries/protocols (e.g. Lido, Jito, Eigenlayer, Rocketpool). If this trend becomes ubiquitous, expect to see wrapped/(re)staked versions of ETH, SOL, and AVAX preponderate the rankings, leading to the displacement of native assets. Extrapolate the current trend in ETH (e.g. stETH, rsETH, ankrETH, rETH, mETH) to other L1s/L2s, and it becomes clear that this will lead to a cluttered UX for CMC's global rankings.

Double-counting (accuracy)

This affects the global market cap statistics ($2.38T as of 17 June 2024), which are widely referenced as a heuristic to identify a cycle 'top' or 'bottom'. Some VCs have prognosticated that a $10T global market cap could mark the top of this cycle. However, does the $10T target include rehypothecated cryptoassets? That this detail is often glossed over belies the outsized impact that it could have on this cycle's duration. Invoking the Thomas Theorem, if men define situations as real, they are real in their consequences. Reporting overstated global market cap stats would mean that the $10T global market cap target is hit earlier. This could lead to a shorter cycle as asset managers de-risk once this schelling point is hit.

Innovate When the 'Stakes' Are High

Till now, no one has sought to tease apart this distinction. Existing approaches across aggregators are binary: publishing a verified market cap vs not ranking rehypothecated cryptoassets. This is suboptimal.

As the industry standard bearer, CMC recognises the systemic importance of (re)staked/wrapped assets and has taken it upon itself to innovate by giving this unique asset class more prominence without double-counting market cap:

- Wrapped/(re)staked assets will have a dedicated ranking page that users can easily access on the homepage, thereby decluttering the global rankings

- Wrapped/(re)staked assets will not be double-counted towards the global market cap statistics.

Benefits

Decluttered UX

Separating the rankings of wrapped and staked crypto assets improves the user experience of its global rankings and highlights the importance of this emerging asset class, while reducing the number of displaced native assets on the global rankings.

Enhanced accuracy & granularity

Additionally, this approach enhances accuracy and granularity by avoiding double-counting rehypothecated market caps, allowing users to distinguish the true value of these assets precisely.

This evolution of CMC's rankings demonstrates its ongoing commitment to adapt and lead in the complexities of the crypto market while ensuring that its fundamental values of integrity and precision continue to guide its path forward.