London based Cryptocurrency data and indices provider CryptoCompare is trying to make simple to find good and bad cryptocurrencies. Recently, it has released an Exchange Benchmark Product which ranks over 100 active spot exchanges from all over the world.
The latest product is meant to provide users a "Comprehensive, granular and reliable source of information on the best trading venues." CryptoCompare Exchange benchmark was released to fulfill the requirement of reliable metrics to estimate a large number of crypto exchanges now offering services across the globe.
Apart from this, Cryptocompare says that the latest product is released in response to increasing industry concerns caused due to research depicting that a large number of crypto exchanges across the globe will be using wash trading and other strategies. This also includes spoofing and incentivized trading schemes to artificially inflate trade volumes.
The press release states:
“The problem has been getting worse with lower quality exchanges (ranked C-F) increasing market share by 30% in the last 12 months, demonstrating the need for a ranking methodology that does not rely on aggregate volumes.”
In order to resolve this issue, the firm has developed its Exchange Benchmark deploying both a qualitative and quantitative approach.
Instead of depending on the aggregated volume data, the benchmark uses "correlation-of-volume-to-volatility and standard-deviation-of-volume as inputs to CryptoCompare’s 30+ metrics."
Using the benchmark's metrics, the firm analyzed the data of exchanges for the whole May month and claims that Coinbase, Poloniex, and Bitstamp are the top three crypto exchanges respectively. While others such as BitFlyer, Liquid, itBit, Kraken, Binance, Gemini and Bithumb to fall under the list of top 10 Crypto Exchanges worldwide.
In the benchmark system, the exchanges are graded from high to low - through AA, A, B, C, D, E, F - as per their overall cumulative score relative to the pool of exchanges present in the rankings.
The press release states that benchmark will enter into the CryptoCompare's aggregate indices to build reference rates for top tier exchanges to provide investors and traders with a high-integrity dataset. A CryptoCompare analysis is being made as per the public information and its methodology has been revealed in the report.
Co-Founder and CEO of CryptoCompare, Charles Hayter stated,
“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, a crypto index fund provider submitted a report to the United States Securities and Exchange Commission in March 2019 ensuring that 95% of volume of unregulated exchanges appears to be fake or non-economic in future.
The report says that only 10 Crypto exchanges are seeing the real volume. This list includes Coinbase, Bitfinex, Gemini, and Binance, as well as Bitfinex and Bittrex, both of which are not present in the CryptoCompare's top 10.