CMC News & Updates

Liquidity Metric To Combat “Volume Inflation” Problem

Launch announcement includes improved pricing algorithm and several new products to empower users in the cryptocurrency space

We just made a series of very important announcements at our inaugural conference in Singapore! With these announcements, we aim to continue raising standards in the cryptocurrency industry, and empowering our users to make informed choices.

Liquidity by CoinMarketCap

First, we introduced a new metric called Liquidity.

In the past year, with increasing volume inflation, the volume metric started to lose its purpose as a reliable way to gauge real trading interest. Other solutions, such as handpicking only a few “trusted” exchanges or using unrelated metrics like web traffic, were non-comprehensive and did not address the root cause of the issue.

Our new metric will focus on what matters most to investors and traders: liquidity. With our Liquidity metric, we hope to provide public good to the crypto markets by encouraging the provision of liquidity instead of the inflation of volumes.

With this metric, our users will be able to find the most liquid market for more than 3000 cryptoassets, so that they can trade even more efficiently, with the least slippage.

The Liquidity metric by CoinMarketCap is designed to eventually replace volume as the default metric when ranking market pairs and exchanges.

The detailed write-up on how the Liquidity metric works can be found on our Methodology page.

To highlight a few key points:

  • Liquidity refers to the ease of being able to trade in and out of an asset, or in this case cryptocurrencies.
  • The Liquidity metric by CoinMarketCap takes into account a wider range of key variables from the order book, such as the distance of the order from the mid-price, the size of the order and the relative liquidity of the asset in question.
  • The metric has been designed to measure liquidity in an adaptive manner and the calculation is made by polling the market-pair at random intervals over a 24-hour period and averaging the result. This takes into consideration differences in global time zones and the fact that order-book depth changes constantly due to immediate market conditions.

We refrain from using a static percentage depth to calculate Liquidity, as the absolute liquidity among different cryptocurrencies is inherently different.

The adaptive methodology will make the Liquidity metric very difficult to “game” as orders would need to be placed close to the mid-price, or risk being counter-productive to the Liquidity metric scoring.

The Liquidity metric will be rolled out in three phases on CoinMarketCap’s website; first it will be applied to influence the ranking of market pairs, followed by exchanges, and finally cryptoassets.

Recent and Upcoming Initiatives 

Other exciting products and initiatives we have announced at the conference that you can look out for include: 

  • Jobs board, where companies can list job openings and talent can search for new opportunities.
  • Interest, a tool for comparing interest-generating platforms for over 40 crypto assets including Bitcoin, ETH, XRP, Tether, Litecoin and more.
  • Partnership with Yahoo Finance through which CoinMarketCap now provides its trusted pricing and indices to power the cryptocurrency markets on Yahoo Finance by the end of the month.
  • Educational site coming up in early 2020 that will comprise of guides and tutorials curated with thought-leaders from the cryptocurrency space.
  • New partners providing even more content on CoinMarketCap so you can look at data beyond price, volumes, and now, liquidity: CryptoBriefing, TokenInsight, and IntoTheBlock.
  • New filtering and tagging options for you to take greater control of your experience on the CoinMarketCap site.
  • A design refresh coming soon to CoinMarketCap!

We are ever thankful for all your continuous support and patience as we continue to innovate and deliver our best!

16 comments on “Liquidity Metric To Combat “Volume Inflation” Problem

  1. A deep and helpful article to beginners to get knowledge about liquidity in the market. Your guidelines are really worth it. Keep us update.

  2. Would be good (and easy) to add ratio of liquidity and (claimed) volume. Instant way to spot the cheaters

  3. Excelente este artículo ,ilustrativo de aprende sobre la liquidez de CoinMarketCap gracias

  4. Agoro Dauda

    I,m always enjoying the way you are explain every points, and my question is as at present what is the number of the crypto coin now

  5. Everyone wants easy access to purchase all cryptos listed on your site, because no third party sites have / offer every crypto asset that you list. We want the FREEDOM TO CHOOSE TO PURCHASE ANY CRYPTO ASSET that you have listed. Please consider adding this feature to your site or start a new exchange site where those purchases can be performed. Thank you.

  6. Hello CoinMarketCap… I believe and suggest that you all be the regulator for the cyprocurrency market spheres. As SEC to the stock exchange, then CoinMarketCap to the cryptocurrency exchange. I hope you all will consider my above suggestion.

  7. SaulRosenberg

    I like how you readily admit exchanges and the volume they put forth are scams. Kudos to you!
    Now show YOUR metrics vs THEIR put out metrics to show people just how inflated/off/scammery their numbers truly are so we in the crypto community can point to them and warns others (and avoid them ourselves).

  8. Tyler York

    When will the new factor (Liquidity) be set in place and added to show new prices?

  9. Oh the King of wash trading exchanges Bibox and Bitforex have a huge problem now

  10. Karl B Hensel

    Any metric improvement that helps alleviate gaming by whales is welcomed. I believe a more relative metric would be a real world usage metric as in which liquidity is measured in real services and goods that are being purchased by any coin or token would indeed reflect the true value of said coin and or token. Speculative market is of little use in evaluating coins and tokens in my humble opinion.

  11. Would be great to see a circulation tracker – to be able to visualise large dumps/selloffs and increases in circulation generally by developers across time.

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