While the vision held by many involved in Bitcoin, cryptocurrencies, and blockchain is an altruistic world of fewer bad actors, the digital asset market is seemingly plagued with shortcomings. In fact, countless reports have revealed that cryptocurrency trading venues and certain projects are far from infallible, citing concerns of widespread data manipulation (wash trading, etc.) to play at investors’ heartstrings.
But CoinMarketCap, the most-visited data provider (and webpage for that matter) in this embryonic industry, is looking to change this with a new initiative.
Data Accountability & Transparency Alliance (DATA), as the venture has been dubbed by CoinMarketCap, is a consortium of industry companies seeking to promote “greater transparency, accountability, and disclosure” from all firms in the space. In a statement, issued on the day of the site’s sixth birthday, the company revealed that it intends to gather more data points to empower its users to make “more informed decisions,” and to give projects a platform to differentiate themselves from the often non-transparent pack through “enhanced discourses.” It was further explained:
The overarching objectives of DATA are to: 1) Review, align, and enhance reporting standards across the industry. 2) Identify gaps, propose strategies and measures to enhance data accountability and transparency.
Joining CoinMarketCap at launch will be a handful of exchange partners, namely Binance, Bittrex, OKEx, and Bitfinex. More partners are expected to join DATA with time. According to the site, partners will be responsible for suggesting updates to DATA’s transparency policy, evaluating the state of cryptocurrency data, funding transparency initiatives, and harmonizing exchange API standards through CoinMarketCap.
DATA’s first order of business is to mandate “all exchanges” listed on its data aggregator to broaden the flow of information by providing live trading and order book data, specifically in a bid to ensure liquidity, order book depth, bid/ask spreads, and “other meaningful measures” are as accurate as possible. Those that do not provide such data will be shunned by CoinMarketCap. If this goes well, DATA intends to then provide CoinMarketCap with “enhanced data and metrics,” like wallet information, historical trade data, team information, develop activity, and so on and so forth, for coins and exchanges.
All this comes presumably in response to a report from Bitwise Asset Management, a San Francisco-based cryptocurrency-focused investment services firm, that revealed that 95% of all BTC trading activity is decidedly false “and/or non-economic in nature.” As Blockonomi reported, the company noted that “suspicious exchanges” such as the little-known CoinBene, utilizes wash trading techniques like “trade printing” and “monotonic” automatic purchases and sales, to falsely boost their rank on CoinMarketCap.
The Importance Of ‘Clean’ Crypto Data
Some might be left asking: if wash trading and similar devious techniques don’t affect prices, why does the cryptocurrency market need ‘clean’ data?
Aside from protecting investors and companies from dealing with the wrong exchanges or projects, Hunter Horsley of Bitwise has stated that spotless data vectors may give the U.S. Securities and Exchange Commission (SEC) a reason to finally approve a Bitcoin exchange-traded fund (ETF). He explains in the end, what truly matters for the SEC is a fleshed-out comprehension of this ecosystem’s ins and outs, not a confirmation that all Bitcoin exchanges, investors, and other players are infallible.
And as Matt Hougan, Bitwise’s head of research, recently opined, the discrediting of false volumes show that Bitcoin markets are surprisingly efficient. In fact, Hougan explains that if you are to only take legitimate trading activity into account, Bitcoin’s market looks a lot more like that of gold and other commodities — a healthy sign.