Updated: CoinMarketCap Now Provides Crypto Investors With Data on Liquidity
Crypto analytics provider CoinMarketCap has announced a new metric for liquidity of crypto exchanges and token pairs, designed to replace volume as the principal metric.
Update 03:00 UTC Nov. 17: This article has been updated to include comments from a CoinMarketCap executive to Cointelegraph.
Leading crypto data site CoinMarketCap has announced the launch of its new metric to compare exchanges and token pairs based on liquidity.
New gadget on the dashboard
The announcement comes from The Capital, CoinMarketCap’s inaugural conference in Singapore on Nov. 12, and the tool is now live on the company’s site. The new metric will reportedly incorporate data from 3000 crypto assets.
Intending to filter out market manipulation, CoinMarketCap will reportedly base the new liquidity metric on adaptive data. Carylyne Chan, chief strategy officer at CoinMarketCap, elaborated on the firm’s aims with their methodology:
“We believe our adaptive methodology will make our metric very difficult to ‘game’ as orders would need to be placed close to the mid-price, or risk being counter-productive to the Liquidity metric scoring.”
Elaborating on what this adaptive methodology consists of, Chan told Cointelegraph:
“With the new Liquidity metric, orders that are closer to mid-price or current market prices are given heavier weightage. Those orders further are discounted. The extent of the discount adapts according to the absolute liquidity of the market-pair, by studying the order book depth and distance from mid-price.”
Liquidity > Volume
The firm said that it sees its new metric as a way of escaping dependence on volume reporting, which is often subject to wash trading and other means of manipulation on different exchanges. At The Capital, Chan said that “volume has lost its value as a metric.” She further explained CoinMarketCap’s desire to shift focus away from volume:
“Today, we are introducing a new metric to highlight what matters most to investors and traders: liquidity. With our Liquidity metric, we hope to provide public good to the crypto markets by encouraging the provision of liquidity instead of the inflation of volumes.”
Chan explained to Cointelegraph that CoinMarketCap is still working to expand the number of exchanges provided the company with data on liquidity:
“While volume is a single number reported by exchanges, Liquidity requires us to apply our adaptive algorithm to the order book data received, which requires some time. At the moment, we have received order books from 70% of the listed exchanges. We highly encourage any exchange who hasn't submitted their order book data yet to do so, as our Liquidity metric will become the default ranking soon.”
Other new tools from CoinMarketCap
As Cointelegraph reported at the time, CoinMarketCap initially teased their planned liquidity metric at the end of August, in which they cited Nov. 12 as their target date.
In July, CoinMarketCap, alongside crypto news outlet Crypto Briefing, launched a new institutional-grade analysis product called Simetri. The product aims to provide verification and transparency in order-book data from crypto exchanges.