3 Reasons Why You Should Not Trust CoinMarketCap

There has been a lot of talk concerning the reliability of the CoinMarketCap platform, all pointing out its data vulnerabilities. According to various articles, the crypto website reports on fake volumes, comprising the top 25 exchanges among the 260 listed ones. More than 75% of these exchanges expose similar data vulnerabilities that make it hard to trust the platform. Also, Forbes reveals the analysis of major research reports that conclude fake crypto trading volume of about 65% to 95%.

Regarding the concerns raised by the Bitwise report in March 2019, CoinMarketCap’s response to the matter was tweeting, acknowledging the fake volume reports. One tweet quoted, “We’re working hard to build constructive solutions to address volume concerns. We look forward to more suggestions as we build out tools for our users.” 

Forbes estimates that the company’s annual revenue is between $20 million to $30 million, with a 40- person team with expert analysts. CoinMarketCap’s CEO Brandon Chez talks about clearing the issues with the fake volume reports, and he says, “It is an important issue, and we’re actively trying to solve it.” 

Why You Shouldn’t Trust the Platform

There are significant reasons why trusting CoinMarketCap in trading cryptocurrencies is a risk you shouldn’t take. They majorly revolve around data inaccuracy and its general acceptability in trading popular digital assets. Keeping this in mind, the two reasons you should steer away from working with CoinMarketCap include:

  • Fake Volume Reports

The Bitwise blockbuster report released weeks after the BKEX Forbes report elaborates on issues concerning transaction replication. With tried efforts, the company did very little to solve the problem. Later on, in May 2019, the company ventured into the Data Accountability and Transparency Alliance (DATA). Its main goal was to promote data transparency and accountability. Regardless, several exchanges still showed fake volumes, and such included Bitrue and CoinSuper. 

Also, the website added an “adjusted volume” column on its rankings. Despite this effort, the volumes indicated in the column were similar to those in the “reported volume.” Bitwise showed its suspicious concerns about the exchange volumes that the Alameda Research also reflected. According to Nick Carter, a partner at a crypto investment fund, his view on the clean-up efforts by CoinMarketCap was somewhat unrealistic. His comment on the fake volume reports was, “It’s like trying to put out a fire, a blazing house fire, by pouring a small cup of water on it.”

In response to the fake volume reports, Carylyne Chan, CoinMarketCap’s chief strategy officer, explains that the teams’ major efforts are focused on fixing the issue correctly rather than quickly. 

  • Exchange Price Differences

According to Bitwise, there are differences presented in the exchange prices of various cryptocurrencies. However, it is fortunate that the actual Bitcoin exchange price and the ones listed in CoinMarketCap have minimal differences. Regardless, this presents an issue to the users where misleading prices might cause poor investment decisions that are risky in the long run. The company’s response to these exchange differences created significant effects. This was due to the refusal to tackle the issue due to few reports of similar challenges, especially for unpopular tokens listed on the platform. 

The adverse effects of CoinMarketCap’s dismissal to tackle the price exchange differences include publishing fake volumes. Exchanges publishing fake volumes do this to increase their rankings. Despite exposing this issue, the only way to curb the exchange differences is by data-aggregators demanding the same numbers given to regulators by the exchanges. An example of this is in a Coindesk article that explains one user specializing in making tokens appear to be trading actively for non-popular tokens. He charges for a month of fake volume trading and listing of tokens into CoinMarketCap. As such, most users fall victims to similar scams and hacks. In the long run, investors become less interested in crypto investing. 

  • Binance Acquisition of CMC

In late March 2020, the largest cryptocurrency exchange volume proven by market volume, Binance, announced its plans to acquire the CoinMarketCap platform. Binance’s CEO, Changpeng Zhao, explained the opportunity as the largest purchase made with an estimate of about $400 million in the purchase. With this acquisition backed by a leading crypto exchange, many doubts raised pointed out CMC’s data accuracy vulnerabilities. Of course, this would be an issue, and to get ahead of it, the CEO, Zhao, explains that CMC will remain independent. In his words, Binance has no bearing on CoinMarketCap rankings. CoinMarketCap stays committed to providing the most accurate, timely, and quality cryptocurrency data in the industry while benefiting from Binance’s expertise, resources, and scale.” 

Regardless of his comments, six weeks later, CMC’s actions proved otherwise. After the acquisition, CoinMarketCap introduced an updated ranking formula that ‘coincidentally’ put Binance as the top exchange in the list. Moreover, this was not the only change that took place. One was the elimination of an indicator installed in mid-year 2018 primarily to weed out suspicious data. The addition of web traffic was another change made in the CMC platform after its acquisition by Binance, although CMC’s CEO confirmed it was “not a good indicator.” The result of all these changes is evident in proving CMC, once considered the most trusted platform in publishing exchange volumes, is now compromised. Combining the largest crypto exchange platform with the leading source of cryptocurrency data raises many opportunities as much as concerns. Binance now handles all data collected by CMC, and this gives them access to surveillance aptitude. 

In simpler terms, the CoinMarketCap platform has become a marketing tool for Binance. For this reason, data published by CMC proves to be unreliable since it favors Binance as an exchange platform. 

For these reasons, should you trust CoinMarketCap as a source of crypto data, treat the information acquired with much skepticism. 

Effects of These Challenges

The first effect of these challenges experienced in CoinMarketCap is how new and inexperienced users fall prey to the misleading publications posted on the website. In pursuing new crypto investment opportunities with fake volumes and different exchange prices from actual prices, it may apply poor strategies in investing in digital assets. 

Another effect is hacking and scamming presented by the fake volumes and exchange prices. Investors are constantly seeking the most valuable and ranked exchanges, and as such, misleading information presented in CoinMarketCap makes them victims of scams. All this is possible after buying or selling cryptos for different exchanges on the platform. Well, if you are a retail investor interested in using CoinMarketCap, you should be aware of the data inaccuracies presented in the platform. To make profitable strategies, you should view the company’s data with much cynicism. 

Here is a clear example of people being victims of CoinMarketCap’s exchange frauds and the ICO scams advertised through the website. The Bitstraders was the fraudulent initial coin offering that duped one CoinMarketCap user of $230,000, although the founder was arrested. With most of its profits realized in the company are from ads, such cyber crimes are eminent.

Final Word

The world’s biggest cryptocurrency and Bitcoin exchange platform, Binance, announced its intended acquisition of the CoinMarketCap data site and raised concerns. From this announcement, you can see much resentment towards the company due to its data inaccuracies. 

Bitcoin live price
price change

If you are a newbie in the crypto world, various alternatives to choose from the CoinMarketCap website will commence with your cryptocurrency investments. These include CoinGecko and LiveCoinWatch. They provide better features and can assist you in making better investment strategies since they are much more accurate. Acknowledgment of the flaws in CoinMarketCap proves it is less trustworthy since these issues haven’t been solved yet.

Stay up to date with our latest articles

More posts

What Is an Iceberg Order in Crypto?

Iceberg orders allow traders to buy or sell a large quantity of cryptocurrency without tipping off the market. By splitting their orders into smaller chunks, traders can execute their trades without causing undue price movement.  This guide will explain what iceberg orders are and how to use them in your trading strategy. What Is an Iceberg Order in Crypto Trading? An iceberg order lets traders buy or sell a large number of assets without revealing their intentions to the market.…

Ultimate Beginner Guide to Bitcoin Improvement Proposals (BIPs)

Bitcoin Improvement Proposals (BIPs) are essential tools in the crypto community. They allow the Bitcoin community to propose and vote on changes to the Bitcoin Core software.  BIPs can also work for other wallets/services and have a process for development and implementation. This guide will explore what BIPs are, how they work, and some of their benefits and risks. What are Bitcoin Improvement Proposals (BIPs)? Bitcoin Improvement Proposals (BIPs) are proposals for changes to the Bitcoin protocol. Anyone can submit…

A Beginner’s Guide to Identifying and Avoiding a Crypto Bull Trap

Cryptocurrencies are a relatively new and exciting investment opportunity but are also highly volatile. Prices can swing rapidly, and it is easy to get caught up in the excitement of trading. However, the hype may arise without understanding the risks involved. This guide provides basic information on identifying and avoiding a crypto bull trap to safely invest in this exciting market. How to Identify a Crypto Bull Trap Crypto investors are always on the lookout for signs of a bull…

Why Do Some Crypto Projects Issue More than One Token?

In recent years, the popularity of cryptocurrency has exploded. As a result, more and more people are looking to invest in crypto projects. However, not all projects are equal, and it can be challenging to determine which ones are worth investing in. This guide aims to help investors make informed decisions about which crypto projects to invest in. It will explain multi-token models and why they have become so popular among crypto projects.  The guide will also outline the benefits…

Are Hardware Wallets Safer than Online Ones?

An online wallet is a software program that stores cryptographic keys. This technology allows users to make digital payments and secure their online presence. Over the last years, many users have started to trust hardware solutions to store their coins. In this guide, we will explore the pros and cons of using these two wallets. In particular, we will focus on a matter that is vital for crypto enthusiasts: the security of their funds. What Is an Online Crypto Wallet?…

Tips for Trading in a Volatile Crypto Market

Cryptocurrencies are a new and exciting investment opportunity but can also be highly volatile. This guide aims to teach you how to trade in a volatile crypto market to increase your success probability.  We will cover everything from identifying a volatile crypto market to managing risk when trading volatility. So whether you are a seasoned trader or just starting, this guide has something for you. Why Is the Crypto Market so Volatile? The crypto market is volatile because it is…

How to Spot a Crypto Project with Great Tokenomics?

In the cryptocurrency world, there are a lot of projects with amazing tokenomics. However, it can be challenging to determine which projects are worth investing in.  This guide will help you spot a project with great tokenomics. In this way, you can make a great decision about where to invest your money.  Before analyzing the technical components of tokenomics, there are other red flags you should be able to spot. Our guide will begin with this premise and then move…

A Guide to the Signs that a Crypto Project is About to Fail

Cryptocurrencies are digital assets and a payment system invented by Satoshi Nakamoto. They use cryptography to secure their transactions and control new units' creation. Cryptocurrencies are decentralized, not subject to government or financial institution control. Bitcoin, the first cryptocurrency, appeared in 2009. With the rise in popularity of cryptocurrencies, there has also been an increase in crypto projects that end up failing.  This guide will explore the signs that a crypto project will fail. By understanding these signs, you can…

How to Spot a Pump and Dump Scheme in the Crypto World

Cryptocurrencies have taken the world by storm, with their values skyrocketing over the past years. This has led to a huge rush of investors ignoring how to recognize a pump and dump operation. As a result, many people have lost money by investing in fraudulent schemes. This guide will teach you how to identify a pump and dump scheme and protect yourself from becoming a victim. We will also provide tips for spotting legitimate cryptocurrency investments and advise you on…

Understanding the Difference Between Solo Staking and Pool Staking

Solo staking and pool staking are two of the most popular methods of mining cryptocurrency. But what are they, and which is suitable for you?  This post compares solo and pool staking so you can choose the optimal strategy. What is Solo Staking? Solo staking is when users stake their coins by themselves to receive block rewards. By having a staking wallet online, you may receive incentives.  The main advantage of solo staking is that users get to keep all…