CoinMarketCap launches new liquidity metric to combat “volume inflation” problem

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CoinMarketCap launches new liquidity metric to combat

SINGAPORE, NOV 12, 2019 – CoinMarketCap, the world’s most used information resource for cryptoassets and crypto exchanges, is launching a new ranking metric to help its users identify the most liquid market for more than 3000 cryptoassets.

This launch is being made at CoinMarketCap’s inaugural conference, The Capital, held in Singapore from November 12-13, 2019, alongside the announcement of several new products and initiatives.

The Liquidity metric by CoinMarketCap is designed to eventually replace volume as the default metric when ranking market pairs and exchanges.

“The cryptocurrency market is more decentralized and is not subject to the same regulatory requirements as the traditional markets. As a result, we have seen exchanges inflating their volumes in the last two years,” says Carylyne Chan, Chief Strategy Officer at CoinMarketCap.

“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.”

How the Liquidity metric works

How the Liquidity metric works

  • The Liquidity metric by CoinMarketCap takes into account a wider range of key variables from the order book, such as the distance of the order from the mid-price, the size of the order and the relative liquidity of the market pair in question.
  • The metric has been designed to measure liquidity in an adaptive manner, depending on the absolute order-book depth of the market pair and the distance orders rest from mid-price.
  • The calculation is made by polling the market-pair at random intervals over a 24-hour period and averaging the result. This takes into consideration differences in global time zones and the fact that order-book depth changes constantly due to immediate market conditions.

“We refrain from using a static percentage depth to calculate Liquidity, as the absolute liquidity among different cryptocurrencies is inherently different,” added Chan.

“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.”

The Liquidity metric will be rolled out in three phases on CoinMarketCap’s website; first it will be applied to influence the ranking of market pairs, followed by exchanges, and finally cryptoassets.

The rankings of market pairs and top 50 exchanges by Liquidity are now live on CoinMarketCap.

Other new products and initiatives announced at The Capital conference include:

  • Jobs board where companies can list job openings and talents can search for new opportunities.
  • Interest, a tool for comparing interest-generating platforms for over 40 cryptoassets including Bitcoin, Ethereum, XRP, Tether, Litecoin and more.
  • Partnership with Yahoo Finance whereby CoinMarketCap provides its trusted pricing and indices to power the cryptocurrency markets on Yahoo Finance, coming up on Nov 21, 2019.
  • More languages will be offered within the CoinMarketCap mobile app starting with simplified Chinese, which is now available for iOS and Android. Upcoming languages include Spanish, Japanese, Korean and Russian.
  • Educational site coming up in early 2020 that will comprise of guides and tutorials curated with thought-leaders from the cryptocurrency space.

For more information on CoinMarketCap’s Liquidity metric and how it works, please refer to the  Methodology page.

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