Run, CMC - Unqualified Opinions
let's call a spade a spade: CoinMarketCap is hurting crypto
|Messari Research||Mar 27, 2019||6|
Your daily snapshot from the OnChainFX markets dashboard.
Today’s free issue is a treatise against CoinMarketCap. We try to stay positive in general on the incredible teams working on improving crypto information, but we really need to push the industry away from a weak link in the community.
This one is a consolidated version of my tweetstorm earlier today on the topic.
For unique insights from our research team beyond my twitter provocations (like Eric’s post today on the potential parallels between P2P lending, and DeFi lending), you need to subscribe. And you’re not going to want to miss tomorrow’s research brief, which uncovers a major, previously undisclosed inflation bug that hit a top crypto asset.
Stay smart. For less than the cost of a cup of coffee a day.
Run (away from) CMC
With today's launch of our "Real 10 Volumes", we wanted to highlight how important it is that the industry start challenging or moving away from CoinMarketCap as a source of data. Obviously, we think our data is better. But this is about more than competition.
First, we should acknowledge the tremendous job CMC has done over the years.
They were contrarian and right about the long-tail of crypto assets
They have a best-in-class data set with regards to exchange and asset coverage
They've been an open data provider
Impressive company, but the question for us is simple:
Should the industry continue to trust and promote CMC because it was first? Or should we begin holding them to account for some of their 🤔🤔🤔 practices?
We'd argue the latter.
For us, this is a major data integrity issue. Reliance on CMC holds back the industry. Pro investors need a) custody solutions, b) regulatory clarity, and c) reliable markets data to enter the space. CMC is the current standard for c).
But *most* of their data is wrong.
CMC, despite a rumored $100 million in (high-margin!!!) revenue in 2017, has done next to nothing to work on data standards in the past 18 months.
Circulating supply is delivered "as reported" from token teams. That inflates market cap figures which power indices erroneously. Trading volumes are inflated by 20-50x. These are displayed "as reported."
This could impact VWAP calculations for pricing. Indeed, CMC consistently reports inflated prices vs. us, CryptoCompare, Nomics, and CoinCap. (We use CoinCap and Kaiko as data redundancies.)
Again, I want to stress that many of these issues are VERY difficult to solve for. How do you get token teams and exchanges to accurately report treasury and true volume info absent consistent global regs / self-regs? (Aside from working with us, of course.)
One would think that in the past 18 months, CMC would have iterated significantly on their data methodologies, and used their market clout to browbeat token teams and exchanges to honestly report clean data. After all, they are the only data aggregator with that type of leverage.
CMC did not use their leverage to improve data quality. Why? It seems there are three options.
The team has been overwhelmed.
The team is complacent.
The team is not up to the task.
Let's look at these one at a time.
There's a good argument for #1. After all, CMC was (amazingly) built out of a Queens apartment...by a small team. They undoubtedly faced scaling challenges, and had to build out the team to keep up with inbound interest. But $100 million can get you good people, and the team shouldn’t still be overwhelmed after a year-long bear cycle.
There's a good argument for #2, as well. One likely issue is that CMC hasn't been seriously challenged yet. (Also, I'd likely work fewer hours if I experienced the tremendous wealth generation CMC did in the 2017 run up.)
If #2 is true, that's a concern for users. Complacent companies make shitty products.
Finally, there’s the loaded thesis, #3, which argues the team is not up to the task ahead when it comes to professionalizing the business and its data standards. But I find it hard to believe that the scrappy market leader with a massive war chest can't execute anymore. It defies logic.
So we don't know *why* the company has been so slow to adjust their methodologies. Perhaps it's some combination of the three.
That doesn't really matter. What matters is the answer to this question:
Can we trust CMC to make the necessary fixes?
On this point, I think it helps to look at historical intent. And this is where the company's questionable ad policies come back around. CMC was built on the back of ICO mania, and a number of scams who advertised on their site.
I mean, look at this shit:
It is absolutely worth asking the question, “Can I trust a company that turned a blind eye to Bitconnect ads, specious cloud mining "opportunities", and littered their homepage with "guaranteed daily returns!” ads?”
To me, the answer likely suggests you’re dealing with debatable ethics or incompetence. If you're gauging whether to trust CMC and its data integrity upgrades, you should consider:
They've done nothing in 18 months with a massive warchest
They've historically profited from shoddy advertisers
There are now MANY other superior options for crypto data.
Use Messari. Don't use Messari. That isn't really the point here.
Sure, we like our new "Real 10 Volumes." But other data vendors (Nomics, Flipside, Coinmetrics) are also kicking ass. We'd do well to support those alternatives (if not Messari), or at least light a fire under the ass of CMC.
The industry will be better for it.
P.S. Spread the love. Tweet at Messari for requests, feedback, comments, or questions.
Should your colleagues read daily? We now offer discounts for corporate access. Email us, and we’ll onboard your whole team.