One of the most used websites to track cryptocurrencies, CoinMarketCap, decided to stop counting three South Korean stock exchanges when determining the prices. The result: the prices went down, to the great anger of investors.
CoinMarketCap is one of the most used sites to follow the rates of cryptocurrencies such as bitcoin, ethereum, ripple and litecoin. Many investors determine their decisions based on the prices that this site compiles. The site uses the prices of bitcoin exchanges worldwide to calculate a weighted average .
But yesterday, CoinMarketCap tweeted that it no longer counts the price of three Korean exchanges, because they differ greatly from those of other exchanges. It concerns Bithumb, Coinone and Korbit. Remarkably enough, CoinMarketCap announced publicly only hours after the adjustment that this had happened.
As a result of the adjustment, prices fell on CoinMarketCap. This, according to Coindesk, caused a startle reaction, as a result of which the prices actually decreased. At the time of writing, the ten most valuable cryptocurrencies, except ethereum, are all on loss in the last 24 hours .
The fact that the bitcoin price fell in the CoinMarketCap index is logical. For example, the prices on the three conscious South Korean stock markets are around 6000 dollars above average for bitcoin, for example . By taking it out, the price drops automatically.
Anger
Because CoinMarketCap had not announced the step, investors were shocked. On Twitter, they react to their anger by, among other things, speculating about insider trading.
The idea of insider trading is not surprising, according to Teunis Brosens, cryptokenner of ING. "In theory, that could have happened, the people at CoinMarketCap had an information advantage." The fact that the company could do this is one of the big differences with trade on a normal stock exchange.
To prevent insider trading, companies must ensure that price-sensitive information is available to everyone at the same time. "That also explains the panicky press releases when there are rumors about takeovers or mergers," Brosens explains.
Proof of immaturity market
The fact that CoinMarketCap removed the three Korean exchanges from the index from one moment to the next without any communication, shows the immaturity of the market, says Brosens.
"Parties that compose indices, such as the AEX index, announce well in advance when companies come or go, so that investors can anticipate this."
If the company had said in advance that it would exclude the South Korean stock exchanges, this would not have happened, according to Brosens. "I assume they learned that they should communicate this kind of jokes better." The price movements also demonstrate the power of CoinMarketCap: "This site does have a market moving effect, yes."
Panic reaction shows speculation
For Brosens, this is also proof that cryptocurrencies are used for many investors to speculate: "If you invest for the long term, you base yourself on multiple news sources and you do not get terrified and you do not get a sales wave like that" he explains.