Binance has just acquired popular data site CoinMarketCap (CMC), which includes large amount of data on prices, volumes and other metrics for 5,290 cryptocurrencies. But the domain of the website will remain independent from Binance under a holding company, perhaps avoiding concerns over potential conflicts of interest. In near future, CMC is likely to serve as marketing channel for Binance, steering prospective customers toward the exchange and the deal was really the largest one.
Binance CEO Changpeng Zhao is thinking in different way than what others are doing. Zhao is thinking about a mass audience of individual investors after buying the most heavily trafficked website in the space. There has been talking between Zhao and CMC’s CEO Brandon Chez for years. Zhao’s purchase also caps CMC’s journey, from a scrappy outfit run out of founder Brandon Chez’s apartment to a property coveted by an industry leader.
Zhao gave a hint at this impending acquisition in a New Year’s Day blog post. Binance wanted to make an alarming response among retail customers and that’s why they bought nine separate entities last year alone and plans to onboard 180 fiat currencies by the end of 2020.
The deal that took place between Binance and CMC is a record amount that has even been in crypto industry. With the acquisition of CMC, the firm quickly became both the prevalent data source and go-to-platform for asset pricing in the nascent industry. It also became a lightning rod for controversy after a 2019 report to the U.S. SEC by Bitwise which found artificial trade volume from 95 percent of the crypto exchanges that provides data to CMC.
There is a mixed reaction from rival exchanges at the deal and some are saying it is good to see such large M&A deals in the context of a ‘’bearish market in crypto.’’ Some rose question about the independence of CMC afterward. Former CEO of OKEx, Andy Cheung, was more critical in this assessment. He thinks buying of the website is not auspicious for the industry pointing to the conflicts of interest between parties’ missions. Cheung thinks it’s a strange belief of Zhao. An anonymous Silicon Valley crypto investor said the reported $400 million buyout figure and said the overall deal ‘’feels like a favor’’ to CMC founder Chez. Two sources said that Binance is flush with cash.
Market and Data
A certain degree of trust is necessitated between an exchange and a data provider; trust that is likely to be eroded here with CMC under the same roof as Binance. On the off chance antagonist exchanges have itching about the possibility of Binance harvesting data from CMC, those firms will unlikely to provide low-latency and high-granularity data. As per report from another official, the purchase will provide Binance with data on all their competitors, and some of the best expertise for traffic generation in the crypto industry. However, Binance is incentivized to keep leveraging and altering data service transparent to make sure they don’t lose their investment.
Binance is launching both qualitative and quantitative data features in 2020 and it is becoming the focal point of the firm. It is because they want to continue as independent and neutral. Zhao said they will recover all shortcomings of CMC over time and their team is working to resolve it. He entitles the buyout as a win for everyone because the purchase gives freedom to other data aggregators, particularly on the institutional side of the market. These colossal acquisitions are good for the sector and show overall satiety. There won’t be much change for CMC once the acquisition takes place. CMC will continue to alter its infamous advertisement structure but will still host paid-marketing for other exchanges and the firm will operate separately from Binance.