I find this WSJ article on bitcoin data very interesting:
The discrepancies in the bitcoin data reflect the nature of the industry itself. Bitcoin and hundreds of other cryptocurrencies trade on independent exchanges around the world. Every exchange manages its own data feed, comprising millions of trades. Some are regulated and transparent; others are notorious for unreliable volume numbers and fraudulent trading.
In traditional capital markets, exchanges like the New York Stock Exchange andNasdaq Stock Market provide troves of data that help investors value the underlying assets in mutual, index and exchange-traded funds. That doesn’t exist in the crypto market.
What mainly exists currently, he said, are market-data feeds that average prices across a number of exchanges. That makes it difficult to come up with an acceptable definition of fair-market value.
– What Is Bitcoin Worth? There Is Little Consensus in Fragmented Market
If paying with bitcoin had really caught on, transactions themselves would be denominated in bitcoin, goods would be priced in bitcoin, and one bitcoin would be worth, well, one bitcoin. But payments never caught on, and this decade has ended with bitcoin gaining popularity as a security, albeit a purely speculative one.
Now traditional securities, are made traceable by listing them on exchanges, where price discovery happens centrally. Peloton stock is listed on the NASDAQ, which knows what the matching buy and sell prices are at any time, which is the current price of the stock.
But bitcoin is not a traditional security – not only was it not designed to ever be a security, but it’s decentralised. There’s no Bitcoin Co that lists Bitcoin on a chosen exchange. Literally anyone can buy and sell bitcoin without any intermediary. A bitcoin exchange at its core is merely someone putting up a booth on the internet announcing that buyers and sellers can meet here to find each other more easily. Any number of people can put up any number of booths that do the same thing, no permission needed. The “independent exchanges” that the writer refers to is tautological – all crypto exchanges are independent.
I think the presence of multiple exchanges and the difference in prices on each one of them is a good thing, and attempting to legislate a standard price for bitcoin, for instance by forcing some centralisation, would be a tragedy. Bitcoin as a speculative asset and the exchanges that it trades on is a great free market experiment. There will be exchanges that optimise for different things – including swindling customers out of their money. But there will be others that relentlessly optimise for low price. Still others for transparency. Yet more for access. There will be multiple winners, not all necessarily competing with each other, each reporting different prices for bitcoin. That price will be reflective of their audience: exchanges in India have higher prices for bitcoin. That’s just the premium that Indians are willing to pay for access to bitcoin – prices across exchanges in India are quite close to each other. You could have a hypothetical exchange in, say, Germany that became known for manipulating buy and sell pools. As long as it offered something else – say, an exceptionally large humber of trading pairs – customers may well still trade on it. That price will be determined by the buyers’ balancing of apprehensions about manipulation on the one hand and the availability of trading pairs on the other. There is no parallel to this in highly regulated, centralised capital markets.
A single, indubitable price – until now a core tenet of any reliable security – may well be something we leave behind in the case of bitcoin.