Purchase of Crypto Faithfuls’ Favorite Website Raises Eyebrows

(Bloomberg) -- Binance Holdings Ltd., one of the world’s largest cryptocurrency-trading platforms, acquired CoinMarketCap.com, arguably the most popular website among individual investors for tracking coin prices.

Terms of the agreement weren’t disclosed. In an interview with Bloomberg News, Binance Chief Executive Officer Zhao “CZ” Changpeng said that “CoinMarketCap.com is extremely valuable, because they are the landing page of crypto.”

The site has been the world’s 570th most-trafficked over the last three months, according to data tracker Alexa. It also provides rankings of exchanges and coins. While Zhao said CoinMarketCap.com will be run separately from the rest of Binance and remain neutral, industry participants said the acquisition could present potential conflicts of interest.

“Binance could establish themselves as the preferred exchange, defaulting themselves into being the top exchange in the rankings, or use CMC as a funnel to obtain new users,” said Nic Carter, co-founder of competing tracking site Coin Metrics. “While the move may cause some to question CMC’s ability to remain a neutral data provider, it could potentially be very productive for Binance.”

Binance recently raised users’ ire when it, along with several other exchanges, used its customers’ coins without authorization. The exchange later reversed that decision.

On the other hand, Binance could potentially help CoinMarketCap.com improve its data reporting, which has been widely criticized. In a filing to the Securities and Exchange Commission last year, Bitwise Asset Management said that 95% of trading volume reported on the site is fake or non-economical in nature.

The main reason for that is that the various exchanges the site tracks are providing it with fake data in the hopes of being ranked higher: A higher-ranked exchange gets more referral traffic from CoinMarketCap.com. The site has been working on ways to weed that false data out already, and Binance will boost these efforts further, Zhao said.

“It’s not an easy problem to fix, to be honest,” he said. “Most everything requires some kind of judgment or algorithm.”

CoinMarketCap.com was started by Brandon Chez in 2013, and he’s run it out of his home on New York’s Long Island. The company has grown to about 30 people working from home. The deal came together in the last three-four months, Zhao said. Chez will leave his post, but stay on as an adviser.

Market tracker TokenAnalyst estimates CoinMarketCap.com is worth at least $30 million, based on its advertising revenue.

A crypto-industry website, the Block said earlier this week that Binance may pay as much as $400 million in cash and stock. Because it’s such a well-known property, that figure “doesn’t sound unreasonable,” said Aaron Brown, a crypto investor and a writer for Bloomberg Prophets.

Binance is making the acquisition just as much of the world retrenches because of the coronavirus outbreak. Thanks to recent market volatility, however, most exchanges’ revenues have seen a boost. Binance’s website traffic has increased about five times over the past few weeks, Zhao said.

“It could be that people are more interested in crypto, it could be people are just more bored at home and trading crypto just to pass time,” Zhao said.

©2020 Bloomberg L.P.