Crypto data, Binance and the future

At the start of April, Binance acquired CoinMarketCap in a milestone deal that would give it a significant competitive edge over its peers.

Copper Team

In his dystopian classic novel 1984, English author George Orwell wrote: “He who controls the past controls the future.”

Essentially, it means those in control of the narrative can reshape the world around them.

70 years after its publication, I would update Orwell’s famous quote to read: “He who controls the data controls the future.”

Now it appears that exchange giant Binance will be in control of the data, the narrative, and hence the future of the crypto space. I’m talking about the late-March 2020 news it is moving to acquire industry-standard data provider Coinmarketcap (CMC) in a $400m cash and shares deal.

In stark opposition to CZ Zhao, CMC’s founder Brandon Chez has almost zero public profile despite growing his company to become one of the world’s top 500 most visited websites.

This ability to drive a significant amount of traffic was one of the main reasons for the acquisition, sources told TheBlockCrypto. And according to the news website, CMC drew in 207.2m visitors in the last six months, compared to 113.8m for Binance.

Not everyone in the community has reacted positively.

Ankit Bhatia, CEO of sapien network, wrote: “It looks like Binance is building a crypto empire. I’ve always seen CMC as a fair, unbiased platform not controlled by any particular projects in the space. It’s fairly detrimental to have it controlled by an exchange that doesn’t hesitate to skirt around regulations or push its own agenda.”

There are other aggregators in the world, although none approach CMC’s size.

London’s CryptoCompare, founded in 2014, is probably the closest analogue. It certainly boasts the best real-world partnerships and industry bona fides of any aggregator.

For example, it provides data services to powerhouse financial services giants like Refinitv, which is part owned by Thomson Reuters; VanEck’s indices division MVIS; Canadian markets platform Quandl, whose parent company is Nasdaq, and capital markets datacentre BT Radianz Cloud, part of British telecoms giant BT.

Millions of retail traders rely on CMC for new coin issues, data tracking, ICOs, trading volume and live market prices.

CMC has faced significant criticism about the quality of its data, of course. The most notable controversy broke in the wake of the now infamous Bitwise presentation to the Securities and Exchange commission, where the asset manager told the US regulator that 95% of reported trading volume was being created out of thin air by unscrupulous and unregulated exchanges.
CMC told Bloomberg it agreed that concerns over inaccurate data were valid and that it would include new sections on liquidity and exchange quality to represent a more accurate picture of the market.

Trust in a trustless world

This perceived lack of bias or agenda is a persistent issue in the crypto world. But Binance need not be singled out for criticism.

One of the better-known data aggregators sifting through the billions of data points required for trading is Messari. It closed a $4m funding round in November 2019, led by Uncork Captial and supported by Coinbase Ventures, the VC arm of the San Francisco exchange.

Messari CEO Ryan Selkis said at the time that one of the industry’s most intransigent problems was “the co-ordination challenges of self-regulating an emerging asset class and providing timely data to investors with diverse compliance requirements”.

Because the crypto space still lacks tough cross-border regulations, data providers and aggregators still operate in a somewhat murky legal grey area. Their structure is perhaps more opaque than it would be in the wider business world.

This lack of transparency has significant reputational implications.

In August 2019, the SEC charged Russian data website ICORating for failing to disclose it had been paid hundreds of thousands of dollars to promote specific Initial Coin Offerings, despite billing itself as a ratings agency “that issues independent analytical research”.

Perhaps our best view into the future of crypto data comes with the launch of the Intercontinental Exchange data feed, produced in partnership with Canadian service provider Blockstream.

ICE operates the New York Stock Exchange, as well as a pantheon of global futures, options, OTC exchanges and markets, and of course, Bakkt.

The move by this multi-trillion dollar organisation to broaden its crypto data reach speaks to a consolidation of power among larger players. Binance is trying to become one such player. But even as the biggest fish in a small pond, it too could be swallowed up by sharks.

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