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.”
“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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ErisX goes all hands on deck to launch a Bitcoin Futures market
ErisX’s CSO, Matt Trudeau, detailed the company’s four important plans for the future, which includes launching a spot market, to secure a Bit License, DCO, and to launch a futures market.
ErisX currently has a DCM contract, which is a Derivative Contract Market that allows ErisX to run a CFTC-regulated futures exchange. However, ErisX aims to get a DCO [Derivatives Organization], which will effectively allow it to run a CFTC-regulated clearinghouse. A clearinghouse would mean that ErisX can take control of the custody of the assets and clear and settled trades.
The CSO explained the benefit of this, stating,
“There is some efficiency for firms like producers [like mining companies]; if they need to hedge their inventory or need liquidity on a spot market, they could do that conveniently on a single platform. “
Trudeau added that from the “post-trade standpoint” and “the collateral management standpoint,” ErisX would have cash, crypto, and the futures, all stored in their clearinghouse. This would boost efficiency since it would be available for all customers under a single platform. The CSO added,
“… so there is some efficiency in terms of managing collateral, if you don’t have assets on multiple platforms, it can all be in our clearinghouse.”
Apart from the aforementioned plans, Trudeau added that the crypto-industry needs to mature more and that ErisX plans to make a significant contribution to that. He added,
“The market is professionalizing and we think that in terms of what institutions are expecting from a trading/custody experience, we will bring some of the solutions to the market and that’s really the foundational pieces that they are looking in order to build their businesses on top of us.”
Apart from ErisX, LedgerX has also received a go-sign from the CFTC to settle Bitcoin Futures in Bitcoins. Other exchanges include Intercontinental Exchange’s Bakkt and Seed CX.
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