Alternative Finances

PYMNTS Launches Bitcoin Price and Volatility Indices

What is the value of a bitcoin?  This is not a metaphysical question about the nature and purpose of digitally backed currency, in fact it is very straightforward—in U.S. Dollars, what is a bitcoin worth? The answer has been far less straightforward, since until now it could vary based on what source one consulted.

Today that changes, with the official release of the real-time Bitcoin Price Index by PYMNTS to track the trading price of bitcoins.  PYMNTS is also officially announcing the Bitcoin Volatility Index to track the volatility of bitcoin and other alt-currencies compared with traditional currencies monthly.

“There’s too much cheerleading of alt-currencies from some quarters and too much scorn heaped on them from others,” according to Karen Webster, President of PYMNTS.com. “We’re focused on solid analyses of bitcoin and other alt-currencies. The new indices show our commitment to investing resources to help the payments community understand these new payment platforms.”  Webster also noted that PYMNTS.com is planning to extend the indexes to other alt-currencies such as Dogecoin and Ripple.

PYMNTS.com’s partner in calculating the new indexes, Global Economics Group, looked beyond taking simple averages to generate their index, and instead followed scientific methods for calculating financial indexes to develop the BC_PI.

“We calculated a volume-weighted price index using the real-time bid-ask spreads of all exchanges with more than 1 percent of total bitcoin volume,” said Global Economics Group President Chad Coffman.  “Surprisingly, we discovered that the most commonly quoted index used a straight average that gave small exchanges too much influence and then didn’t include many of the actual exchanges.”

Coffman is an expert in valuation and class-action securities-related matters ,with a nationally recognized practice supported by a team of highly-trained finance, economics, and statistics professionals.

“Alternative currencies are a fast growing part of the payments landscape. Unfortunately, when it came to tracking the prices of these volatile currencies it has truly been amateur hour,” noted PYMNTS’ Webster.

The time for amateur hour is coming to an end, as increasingly serious minds turn their attention to bitcoin and its future. Economist Robert Schiller, whose prior greatest hits include predicting the collapse of the housing market, has concluded that bitcoin is a classic bubble heading for a pop.

Others, like Dr. Rosa Abrantes-Metz, a Director at Global Economics Group and an Adjunct Professor New York University Stern School of Business who first spotted the manipulation of the LIBOR index, are concerned over the possibility of financial manipulation in the world of bitcoin prices.

“Given the lack of regulation we should really be on the lookout to see whether bitcoin prices are being manipulated for quick riches.”

Abrantes-Metz concerns are made all the more poignant given both collapse of Mt. Gox and the revelation that at one point a pool of bitcoin miners held more than 50 percent of the mining capacity, giving them a great deal of power to manipulate price.

It is unlikely that the debate between bitcoin friends and foes will end any time soon: cheerleaders will cheerlead and jeer leaders will jeer-lead. Serious minds, however, demand serious data and good debates are based on information that is independent, unbiased and rigorously obtained.

The PYMNTS BTC/PI and BTC/VI provide just that kind of information. They won’t end the argument, but they might just make sure it is carried out at a higher level.

Don’t take our word for it, check it out yourself here. 

 

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NEW PYMNTS STUDY: LEVERAGING THE DIGITAL BANKING SHIFT – SEPTEMBER 2020  

The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.

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