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Top Rating Platforms: Which Exchanges One Can Trust

Svetlana Tereshenok
October 24, 2019 12:00 AM
1 271 Views
Top Rating Platforms: Which Exchanges One Can Trust

The problem of fictitious trading volume brings out risks for the entire cryptocurrency market. With the help of inflated trading volume, trading platforms can manipulate the behavior of market participants, bring down or, conversely, increase the rate of cryptocurrencies. At the same time, the lack of reliable data on trading volume and liquidity of the crypto exchange can potentially lead to the fact that customers will place their assets on deposits on platforms that act like financial pyramids. When withdrawing cryptocurrencies from the accounts of such exchanges, clients often have difficulties, because in fact the trading platform simply does not have the funds to complete such an application.

Fictitious trading volume is the problem of the entire cryptocurrency market and strikes conscientious cryptocurrency exchanges in the first place. This practice undermines the credibility of all participants, even those who do not use such manipulative methods of cheating trades,  says Kossar Sohail, executive director of the British exchange named Bitlish.

When choosing cryptocurrency exchanges, users are most often guided by the ratings of that ones and choose those that are in the leaders of the ratings. We`ve studied the four most famous analytical and statistical information portals, each of which uses its own methodology for evaluating crypto-exchanges.

CoinMarketCap

Launched in 2013 by US programmer Brandon Chaz of Long Island City, CoinMarketCap, an analytical and statistical portal, has become the most popular cryptocurrency price tracking resource. According to SimilarWeb, CoinMarketCap’s monthly audience exceeds 60 million visitors, and this is not counting API users. In addition to cryptocurrency ratings, CoinMarketCap also compiles cryptocurrency exchange ratings. For a long time, the main and in fact the only criterion for evaluating cryptocurrency exchanges at CoinMarketCap was the trading volume.

With the growing cryptocurrencies popularity, crypto exchanges using unfair practices of artificially increased trading volume indicators began to appear in the world. One of these practices is “transaction mining,” when traders earn money on transactions. For example, this summer, little-known young sites — Singaporean CoinBene and Hong Kong Bit-Z, which announced daily trading volumes of more than $ 2 billion and $ 1.5 billion, respectively, were in the CoinMarketCap top ranking of cryptocurrency exchanges. For comparison: this is one and a half to two times higher than that of the popular cryptocurrency exchange Binance. By falsifying the trading volume, crypto exchanges quickly reached the top of the ranking on CoinMarketCap, and thereby attracted many users with real assets and projects who were willing to pay for listing their tokens on supposedly popular trading platforms.

Coinmarketcap rating began to quickly lose its reputation of a reliable service, and in the spring of 2019, the CMC team announced the need to change approaches to evaluating cryptocurrency exchanges. The Data Accountability & Transparency Alliance (DATA) initiative group was created to ensure “greater transparency, accountability and the disclosure of critical information about projects in the cryptosphere”. The key change was the obligation of crypto exchanges to provide CMC with real-time trading data, including order data. Crypto exchanges that did not agree with the new requirement had to be excluded from the site`s database. The initiative was primarily supported by exchanges such as Binance, Bittrex, OKEx, Huobi, Liquid, UpBit, IDEX, OceanEX, Gate.io, KuCoin, HitBTC and Bitfinex.

Now CoinMarketCap offers two crypto exchange rankings to its users — on trading volume declared by the crypto exchanges themselves and on adjusted trading volume. In the first ranking, in the top there are still often trading platforms known for unfair practices to inflate the trading volume. For example, the Chinese crypto exchange FCoin, which uses the trans-fee mining model. In the adjusted ranking, FCoin is not among the top ten crypto exchanges in terms of trading volume, but this list also clearly contains trading platforms that use dubious practices. For example there are Bit-Z and CoinBene which use mining on transactions in this list.

November 12, 2019 there will be another change in the methodology for evaluating cryptocurrency exchanges on CoinMarketCap. It is aimed at improving the assessment of the liquidity of crypto trading platforms. In addition, the more information the cryptocurrency exchange will transmit to CMC, the higher category it will be assigned to. Thus, CMC hopes to motivate crypto exchanges to additional information and transparency disclose. But CMC does not expect a quick victory over counterfeiters.

Using liquidity as a metric is difficult, as it is not quantifiable and is constantly changing. Therefore, to limit possible fraud, the metric that determines the trading volumes on cryptocurrency exchanges will require significant processing, the service representatives told us.

Cryptocompare

An alternative approach to the evaluation of the cryptocurrency exchange was proposed by the team of another analytical service — CryptoCompare, which was launched in 2014 in London. Like CoinMarketCap, for a long time CryptoCompare rated crypto exchanges mainly according to the stated trading volume, but amid growing data falsifying, the company's analysts came to the conclusion that it is necessary to radically change the evaluation criteria. In the summer of 2019, CryptoCompare released its own cryptocurrency exchanges rating named CryptoCompare Exchange Benchmark, which included more than 100 top-end trading platforms.

This time, the ranking methodology took into account more than 30 indicators, which can be grouped into 7 categories: geography, regulatory framework, investments, team and company, data provision, trade monitoring and market quality. On the first lines in CryptoCompare rating were more familiar names, among which there were a lot of crypto market old-timers — Coinbase, Poloniex, Bitstamp, bitFlyer, Liquid, itBit exchanges.

It should be noted that there were these cryptocurrency exchanges that were the first to join the CoinMarketCap DATA initiative mentioned above, which was designed to increase the transparency of cryptocurrency exchanges and remove unfair players from the ratings.

Now on the CryptoCompare website, users have the opportunity to get acquainted with the rating of crypto exchanges with the ability to filter that ones by several parameters. In addition to the trading volume itself, trading platfofms are scored according to their own CryptoCompare evaluation system and get certain points. Even if BitMEX, Binance, CoinBene and ZB exchanges have the largest trading volume according to the CryptoCompare rating, the assessment of these exchanges in other parameters can be significantly lower. So, CoinBene and ZB are rated at 19 and 21.7 points out of 70 possible, respectively, and assigned to crypto exchanges of one of the lowest categories — E.

CryptoCompare has one of the most well-thought-out ratings, says Sohail. — They take into account many factors, which allows a diversified assessment of the site. This includes jurisdiction, team, and transparency of bid data. But here, unfortunately, there are loopholes for scammers, from which their customers and other crypto exchanges suffer.

He draws attention to the fact that CryptoCompare analysts even found indirect signals about a possible increase in trading volume on well-known platforms such as OKEx and Bittrex, while the most conscientious exchanges, in addition to the already mentioned Coinbase and Poloniex, became some small platforms, including Bitlish.

Coingecko

The decisive steps of the most popular analytical service CoinMarketCap on the path to eliminating unscrupulous crypto exchanges from the top ratings pushed other players in this field to similar actions. Two weeks after the announcement of the DATA initiative, one of the alternative portals — CoinGecko — presented its toolkit for determining real trading called Trust Score.

A distinctive feature of the CoinGecko methodology is the recording of traffic data on cryptocurrency exchange sites. They take an information about visitors from the SimilarWeb resource. Since this service shows data on the number of website visitors per month, CoinGecko divides this indicator by 30 to get the average number of visits per day, and then divides the trading volume declared by the exchange by the average daily number of visitors. The resulting value (average trading volume per visitor) is compared with the median of this indicator, obtained from data on 10 “trusted” crypto-exchanges in the research of the analytical company — Bitwise. If the average trading volume per visitor is higher than the median from the group of “trusted” crypto exchanges, then it is adjusted. So CoinGecko displays the normalized trading volume.

In the CoinGecko rating, Binance, Bitfinex, KuCoin, Bittrex, Poloniex, Coinbase Pro, Huobi Global, Upbit, Kraken turned out to be the leaders according to such a methodology.

But many cryptocurrency exchanges immediately criticized this approach. Their claims were well-founded: many of them provide their users with the opportunity to trade not directly on the site, but through their own APIs. Such clients are normally staying out of SimilarWeb`s scope.

Neironix

The idea of ​​launching the project was born back in 2017 — the founders of the Neironix platform decided to create the world's first independent international rating agency in the field of digital economy. The service is based on a global investment process management methodology and its main focuse is concentrated on the cryptocurrency industry.

The information provided by Neironix platform is based on statistical analysis of a large data amount, as well as various risk factors. The Neironix methodology is based on the principles of the international risk management standard ISO31000: 2018 (E), adopted in 88 countries.

Neironix.io is ​​a global cryptocurrency financial analytics aggregator. Although the main scope of Neironix tools is the blockchain sphere, the team is not going to limit it to it — in the future it is planned to connect venture projects to the platform. On the platform, an integrated approach to ranking was applied. So far, the assessment is based on an analysis of 35 risk factors, and in the near future, their number is planned to be brought to 75. This approach allows one to create a real objective picture of a project investment attractiveness. The final rating is assigned to the project after evaluating the totality of all parameters.

Neironix specialists apply a comprehensive approach during the analysis of cryptocurrency exchanges. After a careful study of all the necessary parameters, only the volumes of exchanges on which suspicious activity was not registered fall into the agency rating. Volumes of exchanges with fake numbers are not taken into account when calculating the market trading volume, coin trading volume, etc.

In addition, on the Neironix website, users can subscribe to exchanges, coins and projects they are interested in, and receive notifications of any changes in a convenient way (Telegram, e-mail, RSS or push notifications). Here one can get detailed information regarding the number of trading pairs, the distribution of volumes, supported languages, as well as the latest news regarding a particular exchange.

At the time of writing, the top ten leaders according to Neironix are as follows: Bitforex, DigiFinex, Binance, BW.com, OKEX, Bit-Z, Huobi, Dcoin, BitMart, HitBTC. The list of cryptocurrency exchanges is presented in chronological order on the principle of decreasing daily trading volumes.

And what then?

Trading volume is the most understandable factor for users, and a significant indicator by which customers choose a trading platform. Unscrupulous market participants take advantage of this. The problem is that detecting inflated trading volumes remains an almost unsolvable task.

Creating a cryptocurrency exchange with the illusion of high liquidity is not the most difficult task from the technological point of view. And you can detect such behavior only by indirect indicators that must be taken into account in aggregate. Neither the number of visitors, nor orders data can guarantee the reliability of the data, Kossar Sohail notes. – As the cryptocurrency market grows older, the tools for evaluating cryptocurrency exchanges will improve, and it will be more difficult for fraudsters to work. But while users have to do a difficult job of choosing a trading platform, and in solving this task they will have to rely not only on public ratings, but also on their own common sense and experience.