Nomics Becomes The 1st Crypto Aggregator to Identify The % of Transparent Volume for Cryptoassets
As part of Nomics’ mission to build the transparent data infrastructure for the mainstream generation of crypto, we just released transparent volume indicators for cryptoassets (like Bitcoin, Ethereum, etc.).
This represents the first time an aggregator has designated a percentage of trading volume for a given cryptoasset as “transparent.”
Q1: What Is Transparent Volume?
Transparent volume represents the amount of volume deemed “trustworthy” and high quality by Nomics. “Transparent Volume” might just as well be called “Trustworthy Volume.”
Specifically, transparent volume is the amount of volume for a given cryptoasset that’s moving through transparent exchanges (i.e. exchanges to which we’ve awarded an A+, A, or A- transparency rating).
Q2: What’s A “Transparent Exchange”?
At the time of writing, Nomics defines “transparent exchanges” as exchanges that provide high granularity (trade-level) data with full history. These are exchanges that provide every trade on every currency pair, dating back to the inception of these exchange trading pairs.
Nomics has found that opacity around exchange data is correlated with fake volume, toxic activity, and wash trading.
Everything above notwithstanding, Nomics intends to continually iterate on its definition of “transparent exchange.” We believe that, as an industry, we need to continually improve our ability to spot suspect exchange behavior on a near real-time basis. And we need formal open-source methodologies that can be used by any independent third party to evaluate exchange activity in real-time.
Q3: So… Is 100% of The “Transparent Volume” For An Asset Real (i.e. Not Fake)?
Our transparency work has been heavily influenced by Bitwise Investments’ March 20, 2019 report to the U.S. Securities and Exchange Commission.
Our examination of the Bitwise report revealed two things:
First, eight of the ten cryptocurrency exchanges identified by Bitwise as good actors provide highly transparent historical trade level data (i.e. the most granular and audible form of pricing data available). That is, the one thing we found in common among the good actors identified by Bitwise, is they were very transparent about trading activity.
Second, every single one of the exchanges explicitly called out by Bitwise as bad actors provide limited trading history and virtually no granularity around trading activity.
And this makes sense. Indeed, just like an IRS audit, the more data history and granularity provided by an exchange engaging in nefarious activities, the more likely they are to be caught.
Conversely, upstanding exchange operators have every incentive to provide high-granularity data (with as much history as possible), as this kind of transparency attracts market makers, generates the broader discovery of an exchange’s markets and trading pairs and engenders trust among institutional traders, investors, and regulators.
So, while transparent volume is highly correlated with upstanding exchange practices, we cannot guarantee that 100% of transparent volume is free of fake-volume. We can, however, guarantee that the volume is auditable, that high granularity data is available for this volume and subject to analysis and scrutiny.
Q4: Where Can Transparent Volume Be Seen On The Nomics.com Website?
Transparent volume can be seen on:
Q5: Why Does Transparent Volume Matter?
As shown above (see Q3), transparent volume is much less likely to include wash trading and other forms of toxic volume. Transparent volume is auditable volume (i.e. high granularity data is available for this volume), and subject to analysis and scrutiny.
Q6: Why Does % Transparent Volume (As A Portion of Overall Volume) Matter?
One of the SEC’s major concerns in approving a Bitcoin ETF is the percentage of trading volume that is unsurveilled and subject to manipulation, toxic influences, etc. Our transparent volume metric is intended to help institutions, state actors, and investors assess the percentage of reported trading volume for a given cryptoasset that is auditable and transparent.
Q7: What Does The Data Say About Transparent Volume Across the Cryptosphere?
We’re in the process of doing a broad analysis of transparent volume across the cryptosphere. Until that report is published, here are some fun facts…
- There is only one “top 10” asset by market cap with over 30% transparent volume (BNB)
- There are only three “top 20” assets with more than 50% transparent volume (i.e. LEO, ChainLink, and IOTA).
- Having 1% or more transparent volume puts an asset in the top quartile of % trans vol
- Bitcoin’s transparent volume is only 17%
Email: contact [at] nomics [dot] com