Everyone’s heard of CoinMarketCap by now, but you may not be familiar with CoinGecko. Launched back in 2014, it’s one of the earliest and largest data aggregators in the industry, taking a more holistic approach to tracking tokens and cryptocurrency exchanges. CoinGecko currently tracks more than 4,700 coins and over 300 exchanges.
With the goal of elevating “crypto participants’ understanding of fundamental factors that drive the market”, its founders TM Lee and Bobby Ong wanted to find more transparent ways to track cryptocurrencies. Ong told Coin Rivet:
“We believe that ‘market capitalisation’ is not an entirely great measure of a cryptocurrency’s worth as it’s highly manipulated.”
CoinGecko provides an in-depth analysis of the crypto market
Rather than just track and measure coins and tokens by market cap or exchanges by trading volume, CoinGecko tracks other key factors as well. These include a project’s code progress and open source code development, community growth, and other major events that impact its value.
Ong explains: “We started out as a crypto data aggregator tracking developer and community metrics. For developer stats, we track the Github, Bitbucket, and Gitlab. We count the number of commits, lines added/deleted, stars, forks, and pull requests. For community stats, we track Twitter followers, Facebook likes, Reddit subscribers, new posts, and comments. We believe that by measuring community and developer stats, we get a 360-degree overview of any particular cryptocurrencies.”
With thousands of cryptocurrencies in the market and new ones created each month, the CoinGecko crew wants to help investors better understand the altcoins available to them by giving them as many transparent and qualitative facts as possible. Simply looking at market capitalisation isn’t enough to go by as this can be easily manipulated.
Trading volume is unreliable for assessing cryptocurrency exchanges
Five years after CoinGecko came out, data manipulation in the industry is still a major issue. When Bitwise Asset Management submitted its Bitcoin ETF proposal to the SEC earlier this year, it included a study revealing that as much as 95% of trading volume on cryptocurrency exchanges was fake.
Bitwise reached that conclusion after analysing 81 exchanges over four days in March. Shocking statistics like this show that the actual market for Bitcoin and other cryptocurrencies is much smaller than it appears.
Ong remarks: “Fast forward to 2019, we came to a stage where cryptocurrency exchange data was highly manipulated. In regulated traditional markets, reported volume by exchanges are highly trustworthy and high volume indicates that there is more liquidity in the exchange. However, in unregulated crypto markets, reported volumes by exchanges are highly manipulated.”
CoinGecko’s Trust Score for ranking cryptocurrency exchanges
With statistics like this doing the rounds, it’s impossible to assess the liquidity of an exchange just by trading volume. One must look at other metrics. This is where CoinGecko comes in. The company recently launched a feature it calls “Trust Score” to combat fake exchange volume.
“Instead of sorting exchanges by ‘total 24-hour reported trading volume’, CoinGecko now sorts exchanges by Trust Score,” says Ong.
“This is a combination of normalised exchange volume using web traffic and order book analysis. The change took effect universally on the CoinGecko Exchange Overview and Coin pages on May 13 2019.”
The trading volume of each exchange is normalised using SimilarWeb traffic analysis and the median of users’ trading volume from the Bitwise 10 real-volume exchanges. For order book depth analysis, the bid/ask spread and capital required to move the order book by 2% are both measured.
“When combined with normalised trading volume, these metrics provide a better overview of the real liquidity of any given trading pair on an exchange,” Ong asserts.
In the coming months, Ong says that CoinGecko will further enhance its Trust Score feature by introducing additional metrics. These will include metrics such as trade history analysis, hot and cold wallet analysis, cybersecurity analysis, social media data, crowd-sourced reviews, and API quality evaluation. The data aggregators will incorporate each metric iteratively.
A reliable source of information in an unregulated industry
CoinGecko also produces quarterly reports on the state of the cryptocurrency industry. These provide additional insights into key issues affecting the market and major occurrences throughout the year, such as IEOs and Mimblewimble.
There’s still so much uncertainty surrounding the cryptocurrency industry. CoinGecko provides a trustworthy solution to help you decide where to invest and which exchanges you feel comfortable using. It provides a reliable source of information in what still remains a largely unregulated industry.