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CoinGecko’s “Trust Score” to combat fake trading volume; will inject liquidity using online traffic and order-book data




CoinGecko’s “Trust Score,” to combat fake trading volume, inject liquidity using online traffic and orderbook data
Source: Pixabay

In the wake of several cryptocurrency exchanges misreporting a lot of metrics, market data aggregator, CoinGecko, has decided to take a stand against this fudging of numbers.

Announced on May 13, CoinGecko’s “Trust Score” will move from relying on exchange’s reported trading volume to a more wholesome approach including the likes of web traffic and order-book data. Bobby Ong, Co-founder of the crypto-market aggregator, stated in a post that the “Trust Score” will aim to “combat fake exchange volume data.”

The post cited several exchanges reporting high liquidity owing to the simple, back and forth movement of funds to inflate their reported figures. The update will be included in their “Exchange Overview and Coin pages,” added Ong.

Web traffic data obtained by SimilarWeb will be used as it is “much more difficult to fake web traffic statistics aggregated by 3rd party services.” Order-book analysis will be carried out via two new metrics, the Bid/Ask Spread and the +/-2% Depth Cost, which is based on the USD capital required to move the order book by 2% in either direction.

On the basis of this calculation, the post stated,

“With “Trust Score” in action, the list of top exchanges changes dramatically as the algorithm prioritizes exchanges with tight spread and deep depth, rather than purely by volume. This makes trading volume manipulation much less attractive to exchanges, and puts the focus back onto what matters to the traders – liquidity.”

It should be noted that the Average Daily User Trading Volume [ADUTV] will be calculated based on the median of 10 exchanges, based on Bitwise Asset Management’s report presented to the SEC. The report stated that over 95% of exchanges fake their volume, with the exception of ten exchanges, which CoinGecko is using to calculate their ADUTV.

Speaking directly to AMBCrypto, Ong stated that the Trust Score project was “two months,” in the making, with several factors triggering CoinGecko to revamp their reportage. He added that the current Bitcoin price pump, which began in early April, had “nothing to do with our decision to introduce Trust Score.”

Ong added,

“At the end of the day, we want to guide users to exchanges with the best liquidity and reported trading volume is no longer a good indicator to gauge an exchange’s liquidity hence the need to create Trust Score.”

Since the Bitwise report made news in late-March, two notable events have pushed the market into submission. First, the Bitfinex $850 million cover-up and second, Binance’s $40 million hack. Given that there was a considerable spread between Bitfinex and other top exchanges, the credibility of the suspected exchange has taken a beating.

Referencing the same, Ong stated that crypto-withdrawals are working fine, with some “issues” still present on the fiat withdrawal front. He added,

“In terms of trading activity, Bitfinex is one of the most liquid exchanges in the world and the market still perceives them to be. Our indicators are showing the same.”

For the time being, Bitfinex will not be excluded. However, all exchanges on the list will be monitored and when there are “reasons for concerns,” the “methodology will be altered,” he added.

Another crypto-news and data aggregator, Messari, used the Bitwise information to set up their own cryptocurrency ranking based on “Real 10 Volume,” corresponding to the 10 exchanges mentioned by the Bitwise report. However, CoinGecko will go one step beyond, including website traffic and order-book data, concluded Ong.

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Graduate of Finance and Economics, interested in the intersection of the world of decentralized currency and global governance.


JP Morgan: Big banks stand corrected as Bitcoin rally past intrinsic value; admits current surge mirrors 2017 rise




JP Morgan: Big bank stands corrected at Bitcoin rally past intrinsic value; admits current surge mirrors 2017 rise
Source: Pixabay

Big banks are riding a FOMO wave as the Bitcoin bull-run is just beginning. Spearheaded by the changing colors of JP Morgan, which recently forayed into the digital assets world, the banking elite is now suggesting that their initial stance on Bitcoin and the larger cryptocurrency world might have been off.

A recent chart by JP Morgan shows the current BTC price veer upwards chiding the “intrinsic value” the big bank placed on the virtual currency.

Based on the article by Bloomberg, the price of the coin would reverse towards the end of December 2018 and then make marginal gains until May 2019, all under the $5,000 mark. In reality, the BTC price, after dropping to “rock bottom” at just above $3,100 in early December 2018, edged upwards.

Several spurts of growth were seen in early January and February, prior to a massive April ascendance. On April 2, Bitcoin did away with the bank’s value mode and amassed a daily gain of over 15 percent, fuelling its current rise. Breaking the $5,000 ceiling in the process, which was pegged to remain intact well into May 2019, the king coin is now almost $3,000 ahead of the mark and is not looking to stop.

Source: Bloomberg

It should be noted that JP Morgan’s “intrinsic value” is calculated on the basis of the marginal cost of production, electricity prices, and hash rates. This model does not take into account, at least on absolute terms, the anticipatory effect of the 2020 halving, which, according to a slew of analysts is the behind the price rise.

Nikolaos Panigirtzoglou, the MD in the Global Market Strategy team at JP Morgan stated that Bitcoin breaking through its “intrinsic value” showed signs of mirroring its 2017 bull run. He evidenced this move by comparing the pre-December 2017 slump to the one seen prior to the current bullish swing.

The analyst added:

“Over the past few days, the actual price has moved sharply over marginal cost. This divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time this divergence was resolved mostly by a reduction in actual prices.”

With the analyst admitting that the imparting of an “intrinsic or fair value” to a cryptocurrency, much less a volatile one like Bitcoin, is a “challenging” ordeal, a mere JP Morgan acknowledgement of a Bitcoin bull-run is a remarkable sign for the digital assets industry, especially given the bank’s and its CEO Jamie Dimon’s Bitcoin-bashing in the past.

Mati Greenspan, senior market analyst at eToro attested to the same, adding a key point that JP Morgan failed to take into account in their calculation. He stated:

“Great to see JPM finally admitting that Bitcoin has intrinsic value.
Now wait till they understand that miners who run a surplus tend to begin hording.”

Despite Bitcoin slumping at press time, recording a 1.23 percent decline against the dollar, the prospects look positive. After recording a massive gain on 19 May, briefly surging past $8,000 for the second time in a week, Bitcoin created a High-Low [HL] at $7,100, which many analysts look at with glee.

This HL immediately following last week’s pull-back caused due to post-Consensus bears, a Bitstamp sell-order and market correction showed the king coin’s bullish persistence and can even be a foundation for a $9,000 ascendance, defying any “intrinsic value” expectations.

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