Liquidity Metric, New Features: Interview With CoinMarketCap’s Carylyne Chan
A look into CoinMarketCap's behind-the-scenes.
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As part of its effort to fight fake exchange volumes, CoinMarketCap has released a new ranking tool called the Liquidity metric. The announcement came as the company hosts its first conference, The Capital, held in Singapore.
CoinMarketCap’s Chief Strategy Officer, Carylyne Chan, took some time out from her busy schedule to sit down with Crypto Briefing at the event. Ms. Chan shared her insights into the new metric, how projects can help their chances of being listed on CMC and more.
About the Liquidity Metric
Wash trading and fake volumes have become a significant problem for the cryptocurrency space. The Blockchain Transparency Institute recently confirmed that many exchanges were cleaning up their act, but the issue continues to persist. The new Liquidity metric is designed to make it more difficult for exchanges to falsely inflate trading volumes.
Instead of focusing on pure volume, the Liquidity metric considers other variables from the exchange order book, including the distance of the order from the mid-price, the relative liquidity of the pair in the markets overall and the size of the order.
The Liquidity metric gives orders closer to the mid-price a heavier weight and discounts orders that are further away. The system polls the market pair at random intervals over a 24 hour period — adaptively measuring liquidity by averaging the poll results.
The net result is a metric that’s far more difficult to manipulate, as orders need to be placed close to the mid-price. The Liquidity metric is already visible on the CoinMarketCap website, under the “markets” tab for each asset.
Speaking of the change, Ms. Chan explained why trading volume isn’t accurate for cryptocurrencies: “Volume was a good indicator when we started and that’s how traditional finance measures liquidity. But traditional finance is very regulated. You know that for any given volume, then someone was really trading that asset without the risk of wash trading.”
While the liquidity metric doesn’t directly detect irregularities, it’s still helpful. “With cryptocurrency, it’s more difficult to detect wash trading. Our thoughts are that liquidity is really the most important metric for traders. And so, the new metric is a way for us to help our users to find the best markets to get the best prices,” she continued.
CoinMarketCap plans to roll out the Liquidity metric in three phases: it will be first applied to market pairs, followed by exchanges and then crypto assets.
Getting Projects Listed
CoinMarketCap shows the prerequisites for listing crypto assets on its website. However, the company deliberately doesn’t share any specific metrics that it seeks from them. Ms. Chan explained that if it did, projects would inevitably attempt to game the numbers in the same way that exchanges have been manipulating volume. Earlier this year, CMC unveiled new changes in an attempt to increase transparency into the listing process.
During the discussion, we asked Ms Chan how projects can ensure they have the best possible chance of being listed. Her answer was simple — provide as much information as possible, right off the bat. “You need to kill the back and forth communication,” she advised. “The listing team is inundated with requests. Every time you send another email, it goes back into the backlog of things that the team has to look at.”
According to Ms Chan, there’s plenty of work happening behind the scenes. The company has just launched a jobs board, recruiters and candidates can advertise and search for careers in the crypto sector.
She also talked of bringing the simplicity and design aesthetic of the CMC mobile app to the desktop site. Some of the features are also likely to get ported: “For example, with the mobile app, we have the news feature, which we don’t have on the main site. Users can also save their portfolios, which they can’t do with the main site, so trying to get both to parity will enhance the user experience.”