CoinMarketCap: The Mastermind behind Crypto Rankings

CoinMarketCap: The Mastermind behind Crypto Rankings

CoinMarketCap is the world's most popular cryptocurrency market website, providing users with comprehensive data on global cryptocurrency trading. Founded in 2013, it currently has over 60 million independent visits to its website and is an essential tool for investors and traders in the crypto industry.

CoinMarketCap's 2019 Report

In the 2019 report, CoinMarketCap highlighted the top five platform coins that outperformed Bitcoin with an average annual increase of +98%. These coins were BNB, HT, LEO, FTT, and ZB. In terms of smart contract platform tokens, their average annual increase was 34%, and for privacy tokens, it was -15%. Overall, platform coins and smart contract tokens outperformed Bitcoin in the first two quarters of 2019.

The Importance of Cryptocurrency Rankings

Cryptocurrency ranking websites, led by CoinMarketCap, have become an indispensable part of the cryptocurrency industry. They provide investors with data to choose "reliable" exchanges and cryptocurrencies with higher market capitalization. They also provide traders with channels to understand trading volume information from different exchanges and have become a vital link in the cryptocurrency ecosystem.

Token Deflation and Exchange Competition

In the competition among exchanges, token value is a tangible manifestation of their efforts. Various exchanges are making great efforts on token deflation to improve the value of their platform tokens. OKEx, for example, repurchases and destroys 30% of spot trading fees. ZB has already destroyed over 1.4 billion tokens, while HT and OKEx have announced repurchase and destruction plans.

Platform Coins and Repurchasing

Image source: https://www.zb.com/

Image source: https://www.binance.com/

Image source: https://www.huobi.com/

All ZB coins used for destruction are purchased by the platform from the secondary market; Binance repurchases and destroys 20% of its net profits every quarter; Huobi not only uses 20% of its global and contract revenue for repurchasing and destruction, but also adds the FastTrack destruction pathway.

Market Performance

According to data from the domestic cryptocurrency market website Feixiaohao, as of February 25th, the price increases of the top five platform coins have all exceeded 15% for the year so far, with ZB having the highest increase of 71.63%. From the perspective of circulating market value, BNB has the highest value at $2.041 billion, followed by HT at $879 million and OKB at $766 million. Against this background, BNB maintains its dominance, while the gap between HT and OKB is narrowing.

Repurchase and Destruction Method

In order to truly realize the value of platform coins, most exchanges use a repurchase and destruction method by using a portion of their profits or transaction fees to periodically or irregularly repurchase their platform coins from the market to reduce the total circulation, thus achieving deflation and appreciation. The three mainstream exchanges Binance, Huobi, and ZB were selected for data analysis using several easily quantifiable indicators. Based on their respective rules, we can roughly calculate the net income, business profits, or partial business income disclosed during the reporting period for the destruction of platform coins.

Statistics show that Huobi's original total issuance was 500 million, with a remaining total of 458 million and 420 million having been destroyed, with a current ratio of 91.60%; Binance's original total issuance was 200 million, with 170 million destroyed and a remaining total of 183 million, with a current ratio of 91.5%; ZB's original total issuance was 21 billion, with a remaining total of 7 billion and 14 billion destroyed, with a current ratio of 33.33%.

Cryptocurrency Exchange Analysis

Based on the data above, it can be concluded that ZB exchange has the highest proportion of cryptocurrency destruction, with 33.33% followed by BNB at 8.5% and HT at 8.4%. Among the top three exchanges, Huobi and Binance have the strongest profitability in trading business, with Huobi being slightly ahead, while Bitfinex is weaker in profitability.

A higher number of digital currencies and trading pairs can attract more investors and facilitate currency trading.

In terms of spot trading volume, Binance has the highest adjusted 30-day trading volume, followed by Huobi, Bitfinex, and ZB.

The depth of an exchange's order book can serve as an indicator of its liquidity, with Binance ranking third after FTX and Bitstamp, while Huobi ranks ninth and OKEx ranks eighth.

FTX's Altcoin Index Futures and Major Exchange Rankings

FTX's platform may have the most peculiarly named futures index futures on the market, including the "garbage coin" or altcoin index futures. This derivative product allows investors to short a basket of small-cap altcoin markets. Since its launch last year, it has attracted much attention and multiple media reports.

To illustrate the importance of the five major exchanges, CoinGekco snapshot data from February 12th shows OKEx, Huobi, and Binance as the top three exchanges with the highest total open positions in 24 hours. However, the article emphasizes that the five major exchanges are evenly matched with their own advantages.

Furthermore, CMC rankings play a crucial role in the cryptocurrency market, and the five major exchanges have all gained recognition in terms of technology, products, and services. This proves the strength of domestic exchanges such as Binance, Huobi, and Okex, as well as overseas exchanges FTX and Bitfinex.

CoinMarketCap has recently introduced a new indicator to measure the assets and exchanges with the strongest liquidity in the current cryptocurrency market. The indicator aims to replace trading volume data and provide a more objective reference standard for trading pairs and exchange rankings.

Images:

1. Garbage Coin Index Futures on FTX

   

2. OKEx, Huobi, and Binance Rankings according to CoinGekco

   

3. Five Major Exchanges Comparison

   

CoinMarketCap's New Liquidity Metric

According to CoinMarketCap's Chief Strategy Officer Carylyne Chan, the cryptocurrency market is more decentralized than traditional financial markets, making it less subject to strict regulatory limitations. Unfortunately, this has led to some exchanges manipulating trading volumes to obtain a higher ranking.

To address this issue, CoinMarketCap has developed a new liquidity metric that emphasizes asset liquidity, which is vitally important for investors and professional traders. The new metric will filter out trading pairs or exchanges that rely on false trading to rank at the top, ultimately providing a comprehensive and accurate ranking for the market.

The liquidity metric considers variables such as the distance between order price and mid-price, order size, and relative liquidity of related assets. The measure aims to adaptively evaluate liquidity by taking into account factors such as the absolute order depth of various currency pairs and the distance between order price and mid-price.

The calculation method randomly selects currency pairs for analysis within 24 hours and takes an average result. It also considers the market's liquidity and differences between exchanges due to trading habits in different time zones. This adaptability makes it difficult to manipulate the new indicator since false transactions will not increase liquidity scores and may even have a negative impact.

In conclusion, Bitcoin and its underlying technology, blockchain, have experienced many challenging moments in the past twelve years. While the cryptocurrency market is more decentralized and less regulated than traditional financial markets, it has also attracted some exchanges that rely on false trading volumes to gain an advantage. However, with the new liquidity metric, investors and traders can now obtain a more accurate and comprehensive ranking of the market.

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Disclaimer

The above article only represents the personal opinions of the author and does not reflect the views and positions of Blockchained.news. The content and opinions presented here are for reference only and should not be taken as investment advice. Investors should make their own decisions and trades, and neither the author nor Blockchained.news will be responsible for any direct or indirect losses incurred.

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