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NYSE launches a Bitcoin index

149 points by ghosh 11y ago

sdrothrock 11y ago
NYXBT: https://www.nyse.com/quote/index/NYXBT https://www.nyse.com/quote/index/NYXBT Methodology: https://www.nyse.com/publicdocs/nyse/indices/NYSE_Bitcoin_Index_Methodology.pdf https://www.nyse.com/publicdocs/nyse/indices/NYSE_Bitcoin_In... It's apparently calculated once a day within two hours of 4 PM UK time (GMT +1) and relies on one source: Coinbase Exchange. The methodology is scheduled to be reviewed four times a year.
jackgavigan 11y ago
This is similar to (as in, they've basically copied, right down to the 4pm timing) the methodology used to set the WM/Reuters closing spot rates: http://www.wmcompany.com/pdfs/WMReutersMethodology.pdf http://www.wmcompany.com/pdfs/WMReutersMethodology.pdf
ShirsenduK 11y ago
Good to see Bitcoin going mainstream!
- eterm 11y ago
  Sadly Bitcoin is fundamentally unstable. If the difficultly ever stabilised it is vulnerable to a mining efficiency attack that de-stabilises it. It's one reason that I'll be staying clear even if it does become more mainstream.
  - exo762 11y ago
    May you please elaborate on why do you think difficulty is important and what are exactly the "mining efficiency attacks"? This is the first time ever I see someone mentioning this.
    - celticninja 11y ago
      The statement makes no sense. If difficulty stabilises then it still requires between 30 and 51% to carry out an attack. Adding that to the network causes the difficulty to increase so you need more computing power to get your 30%. If we assume the bad actor already has that computing power then they could do it now or alternatively they are sitting on unused bitcoin hashing power which is becoming less useful everyday.
    - eterm 11y ago
      Let's say that difficulty plateaus, that means that mining hardware no longer is deprecating, because output in bitcoins is dependent only on difficulty*hash rate. (It is a common misconception that hashing is a competition like a "race" and others hash rate affects how quickly you can find bitcoins.) If difficultly is stable then what matters is how efficiently you can mine, i.e. how many bitcoins you can mine relative to how much electricity you spend. Well if you control say a third of the pool, then you can obviously capture a third of the bitcoins and spend a third of the electricity. Or, you can mine alternate difficultly periods. When you mine, the next period the difficulty will be 1. Then you chose not to mine and the pool loses 1/3 of the hashing power, so next round the difficulty will be 2/3. Then it adjusts back and it will be 1 again. The result is that you get to mine at a lower difficulty than the rest of the population. The difficulty increases from your hashing is paid for by everyone else and not by you, then you get the enjoy the reduced difficulty from others not mining as fast. This becomes de-stabilising because the rational thing when faced with this is to join you on only mining the easier periods which further makes the problem worse. This effect starts happening with any amount of hashing power, even with 1% hashing rate you would see a small efficiency improvement by mining alternate difficulty periods.
      - nostrademons 11y ago
        It seems like the result of this is to cycle, with a decrease in difficulty resulting in a following increase in difficulty and then an increase in difficulty resulting in a decrease in difficulty. This is meta-stable: it's not a system that converges on a single value, but it's a system that oscillates between overshooting and undershooting the true value. Plenty of systems work fine like this in nature - it's pretty much a textbook predator/prey dynamic, and yet carnivorous life has been going on for several hundred million years on Earth. It would be a problem if the dynamic was for the number of miners to drop to zero or explode to infinity instead, but this is a negative-feedback cycle, not a positive-feedback one.
  - deleted 11y ago
    [deleted]
  - nostrademons 11y ago
    So are all assets. It's one of the quirks of capitalism that markets remain efficient only to the extent that people believe that they're inefficient, and liquid only to the extent that people are misinformed about an asset's value. To see why, imagine a perfectly efficient asset market with perfect information, where the goal of every participant is to maximize their financial returns. In such a market, all participants know everything that all other participants do, they know that all other participants know everything they do, and they can transact instantaneously without cost. Prices in this market converge instantly upon the "true" value, which can be agreed upon by all market partipants because of their omniscience. Such a market has zero liquidity. Why would anyone transact if they know that a security already has the correct value? For there to be profit potential, the person who sells to you must be misinformed about the security's true value, which contradicts the assumption of omniscience. The interesting thing is that the more market participants believe in the market's efficiency, the more inefficient it becomes. With little incentive to do their own research (why bother, when the current price reflects more information than they could possibly amass?), the underlying fundamental value of the asset can drift further from the consensus price without anyone noticing. This increases the profit potential for people who assume that they know better than everyone else. Eventually, a few of them get rich, the consensus breaks down, lots of people lose their shirts, and the market becomes efficient again. The result is the business cycle. Periods where people believe in the market's efficiency are bubbles (when the consensus price is above the true value) and panics (when the consensus price is below the true value). Periods when they don't are crises, where the prevailing momentum swings but this change in opinion is unevenly distributed. Lots of things fundamental to the modern world are unstable. The whole concept of a financial asset is one of them. I can think of a number of individual industries that have an unstable dynamic, but I'm not going to name them because I believe there's profit potential in them. Public opinion is yet another one.
    - kristopolous 11y ago
      Would you mind breaking that up into paragraphs... It's easier to read that way
      - ximeng 11y ago
  - oldpond 11y ago
    Bitcoin will go down in history as virtual place where a whole pile of virtual money went down the virtual tubes. These virtual currencies will never fly so long as currency speculation is legal. They are repeating all the same mistakes that the current "real" money system exhibits. Bitcoin is subject to the same crooked manipulation schemes that we have operating in the banking systems today.
- sanswork 11y ago
  The list of non-events like this that will be taking Bitcoin mainstream is long and full of non-starters and non-producers. It's an index from a company that maintains over 2200 indices at the moment.
guiomie 11y ago
Can you trade an index ?
- veritas20 11y ago
  In most cases, no. But Futures and Options on Futures are usually tradable on an Index once the futures are created.
- crimsonalucard 11y ago
  If I make one hundred pieces of blue paper and I call it a currency and I start selling it to people, would this type of behavior be questionable? Bitcoin is just a complicated high tech version of this. It's debateable whether or not Bitcoin is empty dreams, outright fraud, or an actual currency. What bitcoin is, is not the point. The point is this "index" you want to buy. Lets say I make 100 pieces of red paper but this time I say each piece of paper represents 1/100th of an index fund that tracks the cost of the blue paper. Also whoever buys a red paper from me has to pay me annual fund management fees. You're telling me you want to buy these pieces of paper that ALREADY track a "currency" that is quite sketchy in nature? If you want to gamble your money, gamble the right way, buy the blue paper, or in other words just buy bitcoin straight up.
  - kordless 11y ago
    > It's debateable whether or not Bitcoin is empty dreams, outright fraud, or an actual currency. It's also debatable if you've stopped beating your wife or are in a loving marriage with her. Hopefully you see what we both did there. Context: http://en.wikipedia.org/wiki/Mu_%28negative%29 http://en.wikipedia.org/wiki/Mu_%28negative%29 Personally, I don't consider Bitcoin a currency. It's more than that.
    - crimsonalucard 11y ago
      Perhaps my wife enjoys BDSM and thus loves being beaten while at the same time being in a loving marriage with me. Different perspectives yield different conclusions, especially when whether or not something is "currency" depends entirely on perspective itself. Hopefully you can realize that. I'm curious to hear why you think it's more then "currency." Personally I think you can't even call it a currency yet.... Though this may change down the road.
omouse 11y ago
now if I could only get my company to accept payments in bitcoin...
- bdcravens 11y ago
  Only a good idea if they immediately convert to fiat, at which point they'll lose out on advantages of a price rise. However, the alternative is worse, as it's pretty easy to lose percentage points in value on any given day. I'd hate to be the guy who had to explain why yesterday's $1.00 payment was now worth $0.97. Perhaps a hedge would be to tie your paycheck to Bitcoin's value at the beginning of the pay period.

149 points by ghosh 11y ago

NYXBT: https://www.nyse.com/quote/index/NYXBT https://www.nyse.com/quote/index/NYXBT Methodology: https://www.nyse.com/publicdocs/nyse/indices/NYSE_Bitcoin_Index_Methodology.pdf https://www.nyse.com/publicdocs/nyse/indices/NYSE_Bitcoin_In... It's apparently calculated once a day within two hours of 4 PM UK time (GMT +1) and relies on one source: Coinbase Exchange. The methodology is scheduled to be reviewed four times a year.

jackgavigan 11y ago

This is similar to (as in, they've basically copied, right down to the 4pm timing) the methodology used to set the WM/Reuters closing spot rates: http://www.wmcompany.com/pdfs/WMReutersMethodology.pdf http://www.wmcompany.com/pdfs/WMReutersMethodology.pdf

ShirsenduK 11y ago

Good to see Bitcoin going mainstream!

eterm 11y ago
Sadly Bitcoin is fundamentally unstable. If the difficultly ever stabilised it is vulnerable to a mining efficiency attack that de-stabilises it. It's one reason that I'll be staying clear even if it does become more mainstream.
- exo762 11y ago
  May you please elaborate on why do you think difficulty is important and what are exactly the "mining efficiency attacks"? This is the first time ever I see someone mentioning this.
  - celticninja 11y ago
    The statement makes no sense. If difficulty stabilises then it still requires between 30 and 51% to carry out an attack. Adding that to the network causes the difficulty to increase so you need more computing power to get your 30%. If we assume the bad actor already has that computing power then they could do it now or alternatively they are sitting on unused bitcoin hashing power which is becoming less useful everyday.
  - eterm 11y ago
    Let's say that difficulty plateaus, that means that mining hardware no longer is deprecating, because output in bitcoins is dependent only on difficulty*hash rate. (It is a common misconception that hashing is a competition like a "race" and others hash rate affects how quickly you can find bitcoins.) If difficultly is stable then what matters is how efficiently you can mine, i.e. how many bitcoins you can mine relative to how much electricity you spend. Well if you control say a third of the pool, then you can obviously capture a third of the bitcoins and spend a third of the electricity. Or, you can mine alternate difficultly periods. When you mine, the next period the difficulty will be 1. Then you chose not to mine and the pool loses 1/3 of the hashing power, so next round the difficulty will be 2/3. Then it adjusts back and it will be 1 again. The result is that you get to mine at a lower difficulty than the rest of the population. The difficulty increases from your hashing is paid for by everyone else and not by you, then you get the enjoy the reduced difficulty from others not mining as fast. This becomes de-stabilising because the rational thing when faced with this is to join you on only mining the easier periods which further makes the problem worse. This effect starts happening with any amount of hashing power, even with 1% hashing rate you would see a small efficiency improvement by mining alternate difficulty periods.
    - nostrademons 11y ago
      It seems like the result of this is to cycle, with a decrease in difficulty resulting in a following increase in difficulty and then an increase in difficulty resulting in a decrease in difficulty. This is meta-stable: it's not a system that converges on a single value, but it's a system that oscillates between overshooting and undershooting the true value. Plenty of systems work fine like this in nature - it's pretty much a textbook predator/prey dynamic, and yet carnivorous life has been going on for several hundred million years on Earth. It would be a problem if the dynamic was for the number of miners to drop to zero or explode to infinity instead, but this is a negative-feedback cycle, not a positive-feedback one.
- deleted 11y ago
  [deleted]
- nostrademons 11y ago
  So are all assets. It's one of the quirks of capitalism that markets remain efficient only to the extent that people believe that they're inefficient, and liquid only to the extent that people are misinformed about an asset's value. To see why, imagine a perfectly efficient asset market with perfect information, where the goal of every participant is to maximize their financial returns. In such a market, all participants know everything that all other participants do, they know that all other participants know everything they do, and they can transact instantaneously without cost. Prices in this market converge instantly upon the "true" value, which can be agreed upon by all market partipants because of their omniscience. Such a market has zero liquidity. Why would anyone transact if they know that a security already has the correct value? For there to be profit potential, the person who sells to you must be misinformed about the security's true value, which contradicts the assumption of omniscience. The interesting thing is that the more market participants believe in the market's efficiency, the more inefficient it becomes. With little incentive to do their own research (why bother, when the current price reflects more information than they could possibly amass?), the underlying fundamental value of the asset can drift further from the consensus price without anyone noticing. This increases the profit potential for people who assume that they know better than everyone else. Eventually, a few of them get rich, the consensus breaks down, lots of people lose their shirts, and the market becomes efficient again. The result is the business cycle. Periods where people believe in the market's efficiency are bubbles (when the consensus price is above the true value) and panics (when the consensus price is below the true value). Periods when they don't are crises, where the prevailing momentum swings but this change in opinion is unevenly distributed. Lots of things fundamental to the modern world are unstable. The whole concept of a financial asset is one of them. I can think of a number of individual industries that have an unstable dynamic, but I'm not going to name them because I believe there's profit potential in them. Public opinion is yet another one.
  - kristopolous 11y ago
    Would you mind breaking that up into paragraphs... It's easier to read that way
    - ximeng 11y ago
- oldpond 11y ago
  Bitcoin will go down in history as virtual place where a whole pile of virtual money went down the virtual tubes. These virtual currencies will never fly so long as currency speculation is legal. They are repeating all the same mistakes that the current "real" money system exhibits. Bitcoin is subject to the same crooked manipulation schemes that we have operating in the banking systems today.
sanswork 11y ago
The list of non-events like this that will be taking Bitcoin mainstream is long and full of non-starters and non-producers. It's an index from a company that maintains over 2200 indices at the moment.

guiomie 11y ago

Can you trade an index ?

veritas20 11y ago
In most cases, no. But Futures and Options on Futures are usually tradable on an Index once the futures are created.
crimsonalucard 11y ago
If I make one hundred pieces of blue paper and I call it a currency and I start selling it to people, would this type of behavior be questionable? Bitcoin is just a complicated high tech version of this. It's debateable whether or not Bitcoin is empty dreams, outright fraud, or an actual currency. What bitcoin is, is not the point. The point is this "index" you want to buy. Lets say I make 100 pieces of red paper but this time I say each piece of paper represents 1/100th of an index fund that tracks the cost of the blue paper. Also whoever buys a red paper from me has to pay me annual fund management fees. You're telling me you want to buy these pieces of paper that ALREADY track a "currency" that is quite sketchy in nature? If you want to gamble your money, gamble the right way, buy the blue paper, or in other words just buy bitcoin straight up.
- kordless 11y ago
  > It's debateable whether or not Bitcoin is empty dreams, outright fraud, or an actual currency. It's also debatable if you've stopped beating your wife or are in a loving marriage with her. Hopefully you see what we both did there. Context: http://en.wikipedia.org/wiki/Mu_%28negative%29 http://en.wikipedia.org/wiki/Mu_%28negative%29 Personally, I don't consider Bitcoin a currency. It's more than that.
  - crimsonalucard 11y ago
    Perhaps my wife enjoys BDSM and thus loves being beaten while at the same time being in a loving marriage with me. Different perspectives yield different conclusions, especially when whether or not something is "currency" depends entirely on perspective itself. Hopefully you can realize that. I'm curious to hear why you think it's more then "currency." Personally I think you can't even call it a currency yet.... Though this may change down the road.

omouse 11y ago

now if I could only get my company to accept payments in bitcoin...

bdcravens 11y ago
Only a good idea if they immediately convert to fiat, at which point they'll lose out on advantages of a price rise. However, the alternative is worse, as it's pretty easy to lose percentage points in value on any given day. I'd hate to be the guy who had to explain why yesterday's $1.00 payment was now worth $0.97. Perhaps a hedge would be to tie your paycheck to Bitcoin's value at the beginning of the pay period.