Cryptocurrency data and indices provider CryptoCompare is working to make it easier to spot good, and bad, crypto exchanges.
Announced Wednesday, the company has launched a benchmark ranking of over 100 active spot exchanges from across the globe, offering users a “comprehensive, granular and reliable source of information on the best trading venues.”
CryptoCompare’s Exchange Benchmark was launched to address the need for reliable metrics to evaluate the large number of cryptocurrency exchanges now offering services around the world.
The firm explains:
“Employing both a qualitative (due diligence) and quantitative (market quality based on order book and trade data) approach, the product does not hinge on aggregate volume data but, rather, uses correlation-of-volume-to-volatility and standard-deviation-of-volume as inputs to CryptoCompare’s 30+ metrics. This is due to existing issues with volume manipulation, wash trading and trading incentives.”
The first analysis, based on exchange data for the period May 1–31, suggests the most trusted three exchanges are Coinbase, Poloniex and Bitstamp in descending order of ranking. BitFlyer, Liquid, itBit, Kraken, Binance, Gemini and Bithumb complete the top 10, again in descending order.
Under the benchmark system, exchanges are graded from high to low – through AA, A, B, C, D, E, F – based on their total cumulative score relative to the pool of exchanges included in the rankings.
The ranking components include: geography, legal and regulatory, investment, team and company, data provision, trade surveillance and market quality. The firm’s analysis is based on public information, and its methodology has been explained in a report.
CryptoCompare cites research indicating that many exchanges are wash trading and using incentivised trading schemes to inflate volumes.
The Exchange Benchmark, CryptoCompare says, indicates the problem has been getting worse, with lower quality exchanges (ranked C-F1) increasing market share by 30 percent in the last 12 months.
Charles Hayter, co-founder and CEO of CryptoCompare, said:
“In response to industry concerns over inflated volumes and the lack of reliable metrics for assessing cryptocurrency exchanges, we are excited to launch the CryptoCompare Exchange Benchmark. We look forward to bringing greater transparency to the digital asset class and improving decision-making for market participants by providing a dataset they can trust.”
Bitwise Asset Management also recently published a list of the 10 exchanges that it found are seeing real volume.
It said in a March report that around 95 percent of volume is being faked, and that the real spot market for bitcoin essentially exists on 10 exchanges conducting nearly $300 million in daily trading volume. Its list also includes Coinbase, Bitfinex, Gemini and Binance, as well as Bitfinex and Bittrex, which aren’t included in CryptoCompare’s top 10.
CryptoCompare said its Exchange Benchmark will be fed into its aggregate indices to create reference rates for the top exchanges.