Everybody in the crypto world probably heard of CoinMarketCap by now. But can we just blindly trust the data they present to us? Well, yes but actually no. Over 80%+ of the data CMC shows is collected from exchanges that practice wash trading.
But what is “wash trading”? Wash trading simply explained: I give you $1 in exchange for 1 apple; we write down that trade and add a total volume of $1 and 1 apple. If we continue doing this for an hour we probably tossed around that same apple and dollar 3600 times, creating a total volume of $3600 and 3600 apples. Noticing something? We didn’t actually trade apples worth $3600, we just tossed around 1 apple 3600 times. That is basically wash trading — creating volume between a few parties involving a small amount of money.
So how can you detect wash trading? Well it’s actually harder than you think. BitWise did a great job a few months ago when they wrote down a list of exchanges practicing wash trading based on their analyzing strategy. They also presented that list to the US SEC when they tried to apply for a BTC ETF. But can we 100% trust this list? Not 100%, but it’s a good start.
Now that we got a list of “trustworthy” exchanges, we can build on top of it. To even detect the last bit of wash trading on those exchanges MarketCap.cc has been developed, a website similar to CMC without all the fake volume.
MarketCap.cc stores ALL trades made on each exchange in realtime and then analyzes them, trying to find any wash trading activities on market pairs and then actively filters them out. We can do that by looking at frequency, quantity and price of each trade on a selected pair. All trades are stored in a Database forever.
MarketCap.cc also provides a Trading Terminal where you can analyze market movements yourself.
Future plans are including more exchanges, more assets and generally show more data than now.