CryptoCompare updated its cryptocurrency Exchange Benchmark for Q4 2019, revealing the top exchanges based on several criteria including counterparty, operational, trading and security risk. The Benchmark ranks over 160 active spot exchanges globally to bring transparency and accountability to the cryptoasset exchange landscape by providing a framework for assessing risk. A grade is assigned to each exchange to help identify the lowest risk exchanges in the industry.
The analysis reveals a shift in the top five exchanges with itBit, the US and Japanese regulated exchange, taking the number 1 spot for the first time. It is followed by Gemini (2), Coinbase (3), Kraken (4), Bitstamp (5), Liquid (6), Bitfinex (7), OKEx (8), bitFlyer (9), and OKCoin (10).
“CryptoCompare’s Exchange Benchmark plays an important role in providing institutional and retail investors with a secure, trusted marketplace. We encourage all initiatives that help to foster best practices among trading venues in this fast-growing industry.” said Gabor Gurbacs, Director, Digital Asset Strategy at VanEck.
Charles Hayter, Co-Founder and CEO of CryptoCompare, commented: “The industry needs reliable metrics to evaluate the vast number of cryptocurrency exchanges globally and we have been extremely pleased with the response to our analysis since launch last year. Our cryptocurrency Exchange Benchmark aims to provide this transparency by assessing exchanges using a clear methodology to assess risk. The result is clear data on which exchanges are managing multiple risks in the most effective manner, improving decision-making for market participants.”
Key findings from the Q4 Exchange Benchmark include:
- Top-tier exchanges (grades AA-B) accounted for 27% of global volumes, down from 33% in Q3.
- Lower-tier exchanges (grades C-E) accounted for 73%, up from 67% in Q3.
- 3% of exchanges have been hacked in the last year.
- Only 16% of exchanges use an external on-chain transaction monitoring provider.
- Only 4% of exchanges formally offer some form of cryptocurrency insurance.
- Only 30% of exchanges are registered as an MSB or possess a crypto exchange license.
- Only 16% of exchanges state they hold more than 95% of crypto in cold wallets.
- Only 7% of exchanges offer a full level 3 order book via REST or WebSocket connection.
- 33% of exchanges now offer margin trading.
- 9% of exchanges use a third party custody provider to store user assets, up from 8% in Q3.
CryptoCompare launched the Exchange Benchmark in June 2019 to evaluate cryptocurrency exchanges globally. Initially ranking over 100 exchanges, it now includes analysis of more than 165 crypto exchanges globally. It employs a qualitative (due diligence) and quantitative (market quality based on order book and trade data) approach and uses correlation-of-volume-to-volatility and standard-deviation-of-volume as inputs to the analysis. The Exchange Benchmark does not rely on aggregate volume data in its analysis due to concerns over volume manipulation, wash trading and trading incentives.
The ranking components include: geography; legal/regulatory; investment; team/company; data provision; trade surveillance; market quality and a penalty factor for negative events. Analysis is based on public information and detailed methodology is made freely available, underscoring CryptoCompare’s commitment to bringing greater transparency and improved decision-making to the cryptocurrency marketplace.