On April 2, 2020, Binance posted on its blog that it acquired CoinMarketCap.com (CMC), the best known crypto data site. It’s been reported that the size of the deal was $400 million in a cash and equity and that Brandon Chez, the founder of CMC was stepping down. He was replaced by Carylyne Chan, CMC’s current Chief Strategy Officer. The basic question is why would an exchange like Binance need a data aggregator like CMC and why would it pay such an enormous amount of money? Well, maybe because CoinMarketCap is one of the most visited websites in the world, with 2.5 to 5 million unique people visiting it, every day.. This is a huge deal for Binance, because it could funnel more visitors from CoinMarketCap, to its product offerings. But just like Jack Ma’s ownership of Hong Kong’s major newspaper South China Morning Post and Jeff Bezos’s ownership of the Washington Post, two things come to mind: transparency and independence. Six weeks after the acquisition, CoinMarketCap changed the way it ranks exchanges, making Binance the top exchange on CMC. Has CoinMarketCap now become a marketing tool for Binance?
CoinMarketCap has been around since 2013. It’s one of the most popular cryptocurrency tracking platforms in the market, with more than 200 million visitors in the last six months. CoinMarketCap is a cryptocurrency data provider, that displays for free a weighted average price and the trading volume for every cryptocurrency in the market.
The website is one of the most popular cryptocurrency data sites, according to Alexa ratings. Alexa ranks CoinMarketCap as the 627th most visited website globally in the last 90 days. It’s ahead of Binance with a rank of 1,127, Coinbase at 1,386, and way ahead of competing crypto data provider CoinGecko at 7,905. CoinMarketCap gets a lot of traffic from countries like the US, India, and Brazil, with millions of users daily.
Over the last seven years, CoinMarketCap has shaped our mindframe when it comes to crypto, what to buy and sell, at what price and on which exchanges to trade. Being one of the first sites of its kind, it became an important source of data for mainstream media like CNBC, Forbes, Bloomberg, WSJ and FT.com, which would quote CoinMarketCap when reporting the price Bitcoin and other cryptocurrencies.
In January 2018, we got a real taste of CoinMarketCap’s power, when it delisted South Korean exchanges, causing $100 billion in value to disappear from the market. The market panicked and reacted to what seemed as a sudden drop in the price of Bitcoin. This event sent crypto into a free-fall that lasted 18 months.
Over the years, CoinMarketCap has had its share of controversy. There have been allegations of “pay-to-play” practices, where crypto projects were asked to pay to be listed, to bump up their listing higher or advertisers that were favored, when listing their coins. Also there have been questions about the data accuracy, when comparing the site’s data to alternative crypto market valuation sites.
Last year when Bitwise issued a report on Bitcoin (BTC) trading figures that showed that 95% of Bitcoin’s trading volume was fraudulent, due to “wash trading”, CoinMarketCap reacted changing its ranking algorithm, adding new “liquidity” metric. Cryptocurrency exchanges inflate their Bitcoin trading volumes, or ‘wash trade’ to earn higher profits.
CoinMarketCap is important to Binance’s overall global strategy. If the $400 million price tag is accurate, it shows that Binance is ready to pay a huge premiums for qualified crypto traffic.
In its effort to expand to the west, Binance has hit a wall trying to penetrate the US and European markets. In the US, Binance has 20,000 visitors a day, something minuscule when compared to the 1 million plus hitting Coinbase. In Europe, Binance has 2,000 daily visitors, a tiny fraction of Bitstamp’s 100,000.
It didn’t take long, before Binance put its acquisition to use.
Even though both Binance and CoinMarketCap announced, after the acquisition, that CoinMarketCap would continue to function as an independent entity, six weeks after the acquisition CMC introduced a new ranking formula, which put Binance at the top of the list for exchanges. CoinMarketCap removed an indicator it created in July 2018, designed to provide more accurate data, and weed out skewed and suspicious data. It also added to web traffic to the ranking formula. Months earlier, CoinMarketCap’s Chief Strategy Officer and acting CEO Carylyne Chan, said in an interview that web traffic was “not a good indicator.”
This has rattled the market. Once a source of data for an entire market, CMC has become a marketing tool for Binance.
There is a clear conflict of interest. The exchange data collected by CMC is now at the fingertips of Binance, giving them surveillance capabilities. It’s unlikely that other exchanges will want to see Binance monetizing their data and using it with the best traffic generation platform in the crypto industry.
Binance rushed when it had CMC change its ranking algorithm.
Combining the power of one of the largest crypto exchanges, with the most popular source for cryptocurrency data, creates all kinds of opportunities. Do you want to list your coin on CoinMarketCap? List your project on Binance. Do you want more publicity on Binance? Pay for advertising on CoinMarketCap. The possibilities are infinite and it could have put Binance in a position to dominate.
But instead, it showed the market that CoinMarketCap is there to serve just one customer, Binance. It makes you think that every bit of information on CMC is skewed in the interest of Binance. Every price, every volume, every coin listing and delisting is there to serve Binance. Binance wasted an opportunity, $400 million and eroded the industry’s trust in CoinMarketCap.
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