Binance Manipulating CMC Exchange Rankings
CoinMarketCap’s release of a new ranking algorithm for exchanges got people talking over the past month. First, because the new ranking miraculously found a way to push Binance, CoinMarketCap’s owner to the top of the ranking. Secondly, it controversially placed Binance’s top competitors in the derivatives market close to the bottom of the pile.
The New Ranking algorithm
This update became necessary after CoinMarketCap received feedback from the crypto community that fake volumes needed to be dealt with. The changes to the ranking algorithm were done in phases. The first one which was met with some strong backlash involved ranking based on web traffic. CoinMarketCap later came out with a new algorithm that took into account exchanges’ spot market pair rankings and the respective spot market pair’s Confidence score. The announcement was later updated to reflect the fact that the new exchange ranking algorithm did not cover derivative exchanges. This clarification was timely as the decision to place the popular derivative platform, Bitmex, down in the 175th position raised some eyebrows and questioned the credibility and integrity of CoinMarketCap.
This new development and claims of Binance being biased remind us of our concluding words in this GAINS Research article discussing the largest mergers and acquisitions in crypto history following Binance’s acquisition of CoinMarketCap.
For the CoinMarketCap deal, Binance claims that both companies would continue to work as individual entities. Given the record of previous acquisitions in the crypto space, is this achievable? Will it turn out to be a replica of Coinbase’s acquisition of Earn.com? Can CoinMarketCap remain autonomous with ranking and listing decisions? M&As are used as a strategy to address growth challenges. What contribution can CoinMarketcap make to Binance and vice versa? All these questions will be answered in due time.
It seems we didn’t have to wait for long as we already have our answers with CoinMarketCap making ‘moves’ just a few months down the line. We will use what we know now amid these new developments to answer the questions.
1) Binance claims that both companies would continue to work as individual entities. Given the record of previous acquisitions in the crypto space, is this achievable?
Umm! No. CZ is too excited about his new toy to let CoinMarketCap be. He said it himself in this article shared by Binance to clarify the happenings at CoinMarketCap. This contradicts his constant denial on Twitter of having a hand in the running of CoinMarketCap.
Just as he is fond of making announcements on behalf of Binance, he has taken over that role for CoinMarketCap. While at it, maybe he can update his role to Public Relations Officer at CoinMarketCap.
If this is not involvement I don’t know what is. What stopped the official Twitter account of CoinMarketCap from making this post?
One could argue they needed a top influencer to pose a question that would get the most answers. Fair enough. Did CZ have to announce the results too?
2) Can CoinMarketCap remain autonomous with ranking and listing decisions?
The use of ‘us’ in the image above clearly shows that Binance and CZ are involved in the running of CoinMarketCap. If not, then why did CoinMarketCap adopt a new metric for the ranking, less than 60 days into the new merger. It’s interesting to note that this metric was rejected by CMC’s Chief Strategy Officer, and Interim CEO Carylyne Chan, in November 2019, in this CMC blog post 6 months prior to the merger.
In the past year, with increasing volume inflation, the volume metric started to lose its purpose as a reliable way to gauge real trading interest. Other solutions, such as handpicking only a few “trusted” exchanges or using unrelated metrics like web traffic, were non-comprehensive and did not address the root cause of the issue.
The old metric ranked by average liquidity placing Binance in fourth place, following Bitfinex, Coinbase Pro, and Huobi Global respectively.
Was this change made to favor Binance? Well, representatives from other exchanges have not minced words in delivering their verdict of CoinMarketCap’s new ranking.
OKEx’s Jay Hao was very scathing with his views shared with cryptocurrency news site CoinTelegraph:
“A partnership with a clear conflict of interest. Or just a very convenient coincidence that soon after being bought, the go-to authority on exchange rankings changes its ranking criteria to a metric that happens to favor its buyer.”
It’s still early days yet to conclude that Binance is being biased with ranking itself high on CMC. If these changes to CMC had been made prior to the Binance acquisition, this wouldn't be a topic for discussion. On the contrary, the crypto community would have praised CoinMarketCap for finally waking up to reality. Besides, Binance ranks first on CMC’s more reliable competitor CoinGecko.
We are looking forward to the release of the derivative exchange rankings. No prize for guessing who will rank number 1 there too. Shhh! Don’t say it. We have to act surprised when it is released.
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