Analysis
Binance’s acquisition of CoinMarketCap: More reality check than poppycock?
Posted:
editor-in-chief
Hold your angry horses, everyone (And yes, that means you too, Nouriel Roubini). It would seem that reports claiming that Binance was at the threshold of acquiring leading crypto-market data aggregator, CoinMarketCap, are actually true. According to a press release shared with AMBCrypto, the exchange platform has acquired CMC for an undisclosed sum, with the two market leaders coming “together to pursue their common vision of making crypto-assets more widely accessible and useful to users globally.”
Shock and awe
Kinda odd, isn’t it? I mean, the signs were there, but each and every one of them suggested the exact opposite.
As soon as the news broke/leaked, the crypto-community was up in arms. Surprise followed indignation, but indignation barely skimmed the surface of the furor the Changpeng Zhao-led exchange faced. And be warned, this was before the acquisition was officially confirmed by either of the parties.
However, there is a lot of substance in the reactions of those who have reacted vocally against such acquisition, both belatedly and otherwise. Think about it – This is a case of a leading crypto-exchange acquiring an independent crypto-market data aggregator.
At first glance, the sale raises the very pertinent questions of conflict of interest and data aggregator independence. Dive deeper and other questions associated with the principle of decentralization pop up.
Lessons from Amazon unheeded?
Let’s address the first two questions. Following the sale, many suspect Binance to be in a position to use its considerable power and influence in an effort to skew data on CMC’s website towards Binance’s own tokens and IEOs. A few have even accused the two parties of planning data manipulation. In fact, according to Sukhi Jutla, Co-founder and COO of MarketOrders,
“Binance is a trading platform and they could influence or tinker with trade data on CMC platforms. This would raise issues of trust and whether or not Binance may artificially or overly promote coins that are listed on Binance.”
This is a discerning allegation to make, especially in light of the fact that both CMC and Binance have in the past been accused of doing little to combat wash trading in the industry.
Why then would Binance stake its reputation on what is, at the face of it, a very risky proposition? According to Jutla,
“This [sale] could be a good way for CZ to expand and lend his personal brand to his new acquisition which could drive even more traffic to both sites and set them both up as the dominant leaders in a market where it can be difficult to ascertain who can be trusted and who is a scam.”
In fact, the press release doesn’t say much, except repeating the fact that CoinMarketCap is “most-trafficked,” “most-cited,” and “independent of external stakeholders.” Then again, by the time this acquisition is officially announced, the third point might not even be valid, so what can one say?
Binance may have gone forward with this deal to build on the great traffic CMC gets, but it may have miscalculated the blowback it would receive for what is a clear conflict of interest. In fact, it also raises a question against CoinMarketCap’s tattered reputation as an independent data aggregator. Will CoinMarketCap truly be impartial? Who will ever believe CMC now? Is there any room for competitors to take its place?
Well, Binance has tried to allay such concerns, with the press release claiming that “CoinMarketCap will continue to be run as an independent business entity,” and will only benefit from Binance’s “expertise, resources, and scale.” Sounds nice, but will anyone believe that?
Consider an example; think of the many concerns that have emerged out of the Jeff Bezos-owned Washington Post covering news related to Amazon. Many have, in fact, accused the Post, one of the world’s greatest papers, of downplaying Amazon’s role in any controversy; this, despite both Bezos and the paper’s editors coming forward to deny any corporate pressure or micro-management.
Such will be the case of CoinMarketCap. It will continue to grow and it will continue to expand, but as can be seen in the aforementioned example, to so confidently proclaim independence can be a risky bet. After all, no company, especially one as big as Binance, ever goes through a major acquisition to provide just “expertise, resources, and scale,” out of the goodness of their hearts.
BUIDLing Binance, choking decentralization?
This isn’t Binance’s first acquisition in recent times, however. In fact, over the past year, the CZ-led exchange has acquired over a dozen projects and firms, including DAPPReview and India’s WazirX. That is an impressive rate, one rivaling the time Google acquired 16 companies in ten months. CZ’s Binance, as the CEO would say, is expanding rapidly and BUIDLing the Binance Universe. However, at what cost?
There is a keen pattern to Binance’s acquisition strategy. The CZ-led exchange platform has for the past year been at the forefront of recognizing little-known growth and utility sectors. Its acquisition of India’s WazirX is a case in point since the platform was one of the first and largest players to recognize the potential of the Indian crypto-market, especially if the Supreme Court were to overrule the banking ban on the use of crypto.
But, herein lies the problem. For a decentralized space, Binance seems to be gaining quite a foothold in the industry. With each acquisition, Binance seems to be laying claim to a pocket of power and centralizing it within an exchange which is headquartered God knows where. Binance, in the words of Ethereum’s Vitalik Buterin, is an exchange that has “too much power,” one that might be perpetuating centralization while its CEO harps on about decentralization.
In fact, similar accusations were made last year after Binance was accused of playing ‘kingmaker’ and wielding too much power following the Bitcoin SV delisting episode.
Another question that needs to be answered is what impact the acquisition will have on the larger crypto-market data aggregator industry. Will someone swoop in to fill the void if CoinMarketCap’s credibility as an independent data aggregator tanks in the near future?
Well, CoinGecko’s Bobby Ong certainly seems to think so. When asked whether CoinGecko can fill this credibility void, Ong told AMBCrypto,
“Most definitely! CoinGecko is now the largest independent market data aggregation website. We intend to remain neutral and continue growing CoinGecko by tracking the various crypto data sources transparently. Upholding data integrity is something which we believe strongly.”
Reality check
These are just some of the reasons why everyone initially thought the news was poppycock. I mean, on the surface of it, it does seem like a very random and thoroughly problematic idea. In fact, the acquisition is more of a risky gamble than an actual acquisition since all that can be ascertained from public knowledge is the fact that Binance’s website traffic is going to pump.
What about CoinMarketCap? What does CMC have to gain from this deal apart from all that was mentioned in the press release? Well, according to Bobby Ong, this may be an expensive exit strategy.
“It is a good exit for the Coinmarketcap team. This acquisition would be one of the biggest exit in the crypto industry.”
The sheer absurdity of the report was why a lot of people (including yours truly), initially, didn’t take the news seriously. After all, some of us were aware of the approaching date on our calendars.
Maybe it's some retarded april fool's but wtf.
— David {scotch maximalist} (@bearishbulltard) March 31, 2020
Here’s another one,
Binance buying Coinmarketcap is probably an april fools joke, can't believe Coinmarketcap is worth 400 million dollars.
— Team underground (@TUnderground_) March 31, 2020
Then again, who am I kidding? After all, we live in a world where the guy from The Apprentice and Bamm-Bamm Rubble are President and Prime Minister. We live in a world where Liverpool, after 30 years of pain and hurt, might be thwarted from winning the English Premier League after bats conspired against it. Is anything even impossible?
One thing is certain, however. The stock behind one of the market’s sacred maxims has risen sky-high.
No, I’m not talking about ‘Keep HODLing,’ although that is pretty LIT. I’m talking about – DYOR; Do Your Own Research. That’s the only way we, as independent crypto-investors, hobbyists, enthusiasts, and whatnot, can subvert and balance out any element of bias or partiality that may arise out of CoinMarketCap’s coverage from hereon.
Don’t believe me? Ask yourself, when the news first broke out, did you just check the calendar and leave it be, dismissing it as an April Fool’s prank? Well, I did, and now I’m writing a commentary on it.
