CryptoCompare has released its Q3 Exchange Benchmark Report, together with an extensive overhaul of the way it ranks exchanges. The most significant change is that the company has chosen to disregard trade volumes in the rankings entirely. The move is designed to prevent exchanges from competing in the ranking tables using market manipulation tactics such as wash trading.
The first CryptoCompare Exchange Benchmarking Report came in the second quarter of this year, which the company acknowledges was a time when concerns about wash trading were increasing. Therefore, this time around, it’s taking a “due diligence first” approach to ranking exchanges. Although liquidity indeed provides an indicator of the chances of an order being matched quickly and without slippage, CryptoCompare believes there are more reliable measures of quality and trust.
The report explains how the new rankings consider exchange performance against 64 qualitative and quantitative metrics covering weighted categories that prioritize legal and regulatory compliance, data provision, and security, with 20 percent of the rating each. “Market quality” is the category that measures trading activity, considering factors including cost to trade, market stability, and liquidity.
The Results Are In
Based on their performance against each metric, 160 exchanges are assigned a rating from the highest, AA, to the lowest, E. The results are intriguing, particularly when compared to the rankings on CoinMarketCap. The top three exchanges in the CryptoCompare benchmarking report, each of which receive an AA grade, are Gemini, itBit, and Coinbase. At the time of writing, these exchanges are ranked on positions 98, 107, and 48, respectively, on CoinMarketCap.
In response to having been awarded the #1 spot on the CryptoCompare benchmarking report, Jeanine Hightower-Sellitto, Managing Director of Operations at the Gemini exchange, stated:
“Our institutional and retail investors need a secure marketplace to buy, sell, and store their cryptocurrency, and we are pleased to be recognized for providing that to the industry.”
Binance, usually considered among the top exchanges in the crypto space, received an A grade in the CryptoCompare benchmarking report. However, it didn’t make the top ten, ranked at #12, compared with #7 on CoinMarketCap. While it scores highly on market quality and data provision, CryptoCompare has scored it below competitor exchanges on legal and regulatory, and security.
The lower rating for legal and regulatory likely arises from the fact that Binance chooses to operate in crypto-friendly jurisdictions, such as Malta and Jersey, for some of its business. This is a factor that the CryptoCompare report states will lower the score in this category.
One could suppose that the Binance hack earlier this year contributed to a lower security score. It’s not clear why Coinbase is the only report among the top 20 with a penalty for negative reports.
CryptoCompare’s updated benchmarking methodology and report comes at a time when data providers in the cryptocurrency space are generally moving away from volume metrics in response to exchanges inflating their trading numbers. Last week, CoinMarketCap also announced a new Liquidity metric, designed to make the company’s exchange rankings more difficult to manipulate.