CoinMarketCap Comprised Almost Entirely of ‘Illiquid’ Cryptocurrencies

The leading statistics website on cryptocurrencies lists some 4,978 cryptocurrencies. If we chart the trading volume of each cryptocurrency, all the coins below the top 40 don’t even register. That means that a whopping 4,938 cryptocurrencies listed can be considered illiquid.

Over 99% of Cryptocurrencies Have Poor Liquidity

As Willy Woo (@woonomic) explains, cryptocurrencies without liquidity are useless for investors. They can’t enter nor exit the market at will. As it stands now, only a select few cryptocurrencies listed on CoinMarketCap have liquidity which can be called ‘sufficient’ given their market capitalizations.

Coinmarketcap lists 4978 coins. Here's the top 50 by volume. Below the top 40 doesn't even register i.e. 4938 coins are illiquid.

Investors want liquidity at entry and liquidity on exit. Very few coins have credible liquidity to be good investments. pic.twitter.com/3kXgn3NWjV

— Willy Woo (@woonomic) November 13, 2019

The whole situation underscores how relatively immature the cryptocurrency industry still is. The vast majority of projects lack basic liquidity.

Should CoinMarketCap Better Vet Its Listings?

However, low liquidity for a cryptocurrency does not mean it is abandoned. If it’s still new and still boasts strong development, then it can take some time to develop a significant trading volume. CoinMarketCap, though, seems to not vet its listings. It would reasonable to say that if a cryptocurrency has neither Github activity nor significant liquidity, then it should probably be removed.

Fake Trading Volume

CoinMarketCap has been criticized before for its lax standards. As BeInCrypto reported earlier this year, the site took significant heat after it was found to be reporting ‘fake’ trading volume. Frankly, it looks like little has changed, though — there has been no recognizable decrease in reported trading volume despite this ‘new metric.’ Reports indicate that, in reality, some 95 percent of cryptocurrency trading volume is ‘fake.’  CoinMarketCap likely won’t start removing cryptocurrencies because it would cause a significant backlash. However, keep in mind that only a tiny fraction of this entire market is actually viable for investors.

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