Originally published on May 29, 2020.
Volume inflation has been a problem in the cryptocurrency space since 2018, with exchanges reporting inflated trading volumes to give the impression of legitimacy and gain wider visibility on the rankings.
At CoinMarketCap, we are excited to bring you our latest solution to addressing the above. Starting May 29, we are rolling out a new ranking system for all our market pairs, totalling more than 22,000 market pairs spanning more than 5,500 cryptocurrencies. In addition, we are also introducing a new Confidence indicator.
Who Is This For?
Anyone who wants to know what the most cost-effective and trustworthy markets are for trading a particular cryptocurrency.
For example, if you want to buy Bitcoin with euros (i.e. BTC/ EUR market pair), how do you determine which exchange is offering you the best price while showing you legitimate trading volumes?
An Easy-To-Use Yet Comprehensive Solution by CoinMarketCap
1) New ranking system for market pairs
Instead of a single metric ranking system, we are transitioning to a combined ranking system.
The market pairs of exchanges will now be algorithmically scored across three aspects — reported volume, liquidity and an estimation of an exchange’s user base (via the proprietary Web Traffic Factor) — and each market pair will have to score well across all three aspects to rank well. The triage of factors is expected to provide a more comprehensive picture of each market pair, ensuring that users make better decisions on where to trade.
Previously, the market pairs ranking was sorted by reported volume only, following the removal of the “adjusted volume” metric for simplicity.
This new ranking system will become the new default ranking for all market pairs, making the user experience fast and easy for you!
For details regarding the methodology of this ranking algorithm, please click here.
2) Confidence Indicator
We are introducing a new indicator that reflects the level of confidence that CoinMarketCap has in the legitimacy of the volume of a market pair reported by the exchange. The aim is to help users become better informed about where they would like to trade.
The indicator, shown in three bands, is based on a machine learning algorithm that takes all the data CoinMarketCap has (e.g. liquidity, order book depths, time and sales, user base size estimated by web traffic variables) to determine if the volume reported by exchanges for that market pair is inflated and to what extent.
The bands are categorized as follows:
High >75%
Moderate 50% – 75%
Low <50%
For details regarding the methodology of the Confidence indicator, please click here.
“Our new ranking and Confidence indicator will use the sophisticated tools we have at hand to simplify the process of deciding on the best market pairs, saving our users time, and managing some of the common risks endemic to errant exchanges.”
Carylyne Chan, interim CEO, CoinMarketCap
How to Use and Interpret These New Features From CoinMarketCap
Step 1: On coinmarketcap.com, start by selecting or searching for the cryptocurrency that you are interested in! Go to the respective detail page: for example, Bitcoin, Ethereum, Tether, XRP, etc.
Step 2: Click on the “Market Pairs” tab. Immediately, you will see a ranking table of various market pairs for that cryptocurrency (e.g. BTC/ USD, BTC/ EUR, ETH/ BTC, etc.)
By default, those ranked at the top are market pairs that score well across several aspects (as explained above).
Step 3: To customize the information for your specific needs, use the filters on the top right corner of the ranking table! You can filter by:
- “Pair” (e.g. BTC, EURO, USD, USDT, etc.)
- “Category (e.g. spot market, derivatives, etc.)
As a final step, we recommend you check the Confidence indicator if you are worried that the volume for a particular market pair may be inflated.
With these new metrics, we hope to bridge the informational gaps for you, cover some ground that will save you time and manage some of the common risks in choosing an exchange. That said, don’t forget that it is still important for you to do your due diligence.
