Binance bought the Cryptocurrency listing project Coinmarketcap introduced a new algorithm to rank exchanges based on additional parameters. A new algorithm for ‘trading pairs’ was also released recently ove the same volume inflation issues.
New Algorithm tightens up the search a little
In the recent update, Coinmarketcap announced a new algorithm to rank the exchanges based on new parameters.
They have replaced the existing tool called Web Traffic Factor which was used to rank the exchanges. However, it was only an intermediate step in the development of a comprehensive solution.
The new algorithm takes into account the Spot Market Pair Ranking and their respective Confidence Score which were introduced recently in the last week of May.
The amendment was Spot Market Pair Ranking
The Coinmarketcap replaced a single metric ranking system with a combination of three aspects to get pair ranking.
- Reported Volume
- Estimation of an exchanges’s user base (via Web Traffic Factor)
Each market pair is expected to perform well in all the three aspects to get a better rank.
*The liquidity score by coinmarketcap comprises the score from 0-1000. If the crypto market is given a score of 1000, then it is said that the market is most liquid and less the score the low would be the liquidity.
* Web Trafic Factor fetches numerous data points provided by various web traffic solutions like SimilarWeb, Alexa, Ahrefs etc and provides the final score. The data points include page views, unique visitor count, bounce rate, time-on-site, relative ranking and keyword searches.
The Confidence Indicator shows how legitimate the reported market pair is according to the coinmarketcap analysis.
The indicator considers all the aspects like liquidity, order book depths, time and sales, user base size estimated by web traffic variables. The indicator has three basic slabs,
- High > 75%
- Moderate 50% – 75%
- Low < 50%
Carylyne Chan, Interim CEO of Coinmarketcap expressed her views on the new update. She said,”
I believe this new ranking of exchanges will provide our users with an accurate reflection of the trading ventures, as they are scored on triage of factors that provide a complete picture. Our machine learning algorithm will improve and adapt to volume, liquidity and traffic changes over time.”
Also Read: Binance to Buy CoinMarketcap at $400 Million
Why was the Update Required?
Traders had earlier expressed their concerns on exchanges artificially inflating volumes so that they seem more prominent and ranked at the top.
Coincidently Binance achieved a perfect web score factor of 1000 which indicates CMC believes in Finance completely.
Binance had reported $8 million in 24-hr trading volumes and secured the first rank, but both Kraken and Coinbase volumes were nearly $450 million per day.
Coinmarketcap has now come up with a new update and claims to provide the users with actual rankings of the exchanges. However, we need to wait and watch the implementation of the new update and also on the accuracy of the rankings in the future.