MtGox no longer the standard for exchange rate

[Its About Sharing]

I think this is great news. I have nothing against Gox, they have done a lot of BTC (as well as bad) but being a decentralized system, BTC depends too much on Gox. There last slip up with suspending USD withdrawls for 2 weeks has already taken its toll, both in price and repercussions: https://mtgox.com/press_release_20130620.html

http://blog.bitpay.com/2013/06/important-update-on-bitpay-exchange.html?oid=1039_1

Thursday, June 20, 2013

Update on BitPay Exchange Rate Calculations

Effective immediately, BitPay has temporarily stopped using Mt. Gox for determining the exchange rate for our invoices.

The rate calculation that BitPay uses for each invoice is now as follows:

1.  Pull the full Level II market depth, on the bid side, from multiple exchanges.

2.  Merge the market depths into one Consolidated Level II table.

3.  Calculate the blended clearing price for the amount of the invoice, assuming an auto-routing market sell order across all exchanges, with zero commission.

BitPay is committed to offering the fairest possible rate to the buyer, while minimizing our counterparty risk.

Don't forget, It's about Sharing...

[SamS]

There's not enough information on how the calculation is actually done -- is it a weighted volume weighted price or just an price average?, what about stale quotes?, etc... -- to tell if this is a "better" standard or not.

[Its About Sharing]

There's not enough information on how the calculation is actually done -- is it a weighted volume weighted price or just an price average?, what about stale quotes?, etc... -- to tell if this is a "better" standard or not.

Great point but at least we are moving in the right direction. I wonder where that information is at though as one would think they have to make that public. (I checked their site but didn't find anything).
Anyone?

[boonies4u]

I'm not using MtGox for my goto exchange rate now that USD withdrawals have stopped. Whatever that's worth.

Not sure if I will return to that even after USD withdrawals resume.

[sayulita]

There is nothing wrong with using MtGox as a standard for the exchange rate. What is wrong is everybody using them as an exchange.

[tstang]

It depends on how you look at it. The best solution should be a weighted average of few exchanges.

[medinscot]

Gox will only loose its position as standard bearer if its volume drop below other exchanges.

There is no "standard" price for anything. The price is what consumers are prepared to pay for the item. As long as an entity is trading more volume that its competitors, then people will use its price as a main reference point. Case in point, if most people use the supermarket, then the price of the supermarket will be used as a reference, regardless of what the so called "recommended retail price" is, or what the corner shop is charging (normally a bit more for convenience to local residents).

[Its About Sharing]

Phoenix1 posted this on the wall thread as a quote:

To calculate the exchange rate for US Dollars, we pull up-to-the-minute BID prices from three exchanges. We take the 2 that are closest together and toss out the third, so that a bad feed from one exchange will not affect our calculation. Of the 2 rates that remain, Bit-Pay uses the highest BID price as our exchange rate.

Now, this is really interesting. Basically if Bitstamp and BTCE are near each other in price, then the Gox price is thrown out. 

Further, consider what this will due to the volume at Gox. If Gox is always higher, then, I believe this means, Gox will not be getting Bitpay's business. Someone correct me if I'm wrong.

IAS

[phoenix1]

Not necessarily ...
Depends upon Bitpay's risk appetite and free cash-flow
They could quite easily play the arbitrage game if they wish, taking in BTC at the Bitstamp bid, selling at Gox and waiting it out.

In reality I think that their own business will suffer most as some people will not want to take an 8% haircut and will simply not use the service while this discrepancy exists
Depends so much on how the situation evolves and if MtGox can maintain client confidence in the interim

No idea how much volume they do, but given the size of the Bitcoin economy relative to the speculative turnover, I cannot imagine it is very much.

[thoughtfan]

Phoenix1 posted this on the wall thread as a quote:

To calculate the exchange rate for US Dollars, we pull up-to-the-minute BID prices from three exchanges. We take the 2 that are closest together and toss out the third, so that a bad feed from one exchange will not affect our calculation. Of the 2 rates that remain, Bit-Pay uses the highest BID price as our exchange rate.

Now, this is really interesting. Basically if Bitstamp and BTCE are near each other in price, then the Gox price is thrown out.  

Further, consider what this will due to the volume at Gox. If Gox is always higher, then, I believe this means, Gox will not be getting Bitpay's business. Someone correct me if I'm wrong.

IAS

This quote is not new.  It has been this way for a long time officially although either their algorithm was more complex than that or at times they over-rode it manually because there have been times before when gox was the outlier but it was still used.  My guess on seeing the announcement is that this means of determining price has been discontinued and superseded by the new one where they are specifically excluding gox and using another means (maybe using btce, bitstamp and cbx (although cbx is really small volume in comparison with the other two).

It is a variation on the old way that I have been using as my means of determining price for some time.  Hence the spreadsheet that gives me this that I occasionally share:



This is the first time I've seen the mtgox volume at less than 50%.  That's quite something.  We live in interesting times

[BCB]

Phoenix1 posted this on the wall thread as a quote:

To calculate the exchange rate for US Dollars, we pull up-to-the-minute BID prices from three exchanges. We take the 2 that are closest together and toss out the third, so that a bad feed from one exchange will not affect our calculation. Of the 2 rates that remain, Bit-Pay uses the highest BID price as our exchange rate.

Now, this is really interesting. Basically if Bitstamp and BTCE are near each other in price, then the Gox price is thrown out.  

Further, consider what this will due to the volume at Gox. If Gox is always higher, then, I believe this means, Gox will not be getting Bitpay's business. Someone correct me if I'm wrong.

IAS

This quote is not new.  It has been this way for a long time officially although either their algorithm was more complex than that or at times they over-rode it manually because there have been times before when gox was the outlier but it was still used.  My guess on seeing the announcement is that this means of determining price has been discontinued and superseded by the new one where they are specifically excluding gox and using another means (maybe using btce, bitstamp and cbx (although cbx is really small volume in comparison with the other two).

It is a variation on the old way that I have been using as my means of determining price for some time.  Hence the spreadsheet that gives me this that I occasionally share:



This is the first time I've seen the mtgox volume at less than 50%.  That's quite something.  We live in interesting times

where are you getting your volume numbers?

[BitDreams]

7:33 PM 6/22/2013 Just logged out from Coinbase. Pleased to say that while mtgox price is 108.87, Coinbase can buy Bitcoins for my account at just 103.xx. Forget the pennies, that's 5$ less per coin right now and I'm just glad they are smart buyers and pass on some savings. It's good business.

[QuestionAuthority]

You can't use US$ for Gox or Bitinstant. Do any of the other exchanges seem to be having problems with the dollar?

[Viscera]

So it's effective emediatly but there is no price listed? At least no obvious link or price on there page. I'm confused, am I missing it somewhere?

[el_rlee]

gox is still around?

Mount What?

[thoughtfan]

So it's effective emediatly but there is no price listed? At least no obvious link or price on there page. I'm confused, am I missing it somewhere?

You can always see BitPay prices here.

And this is how 24 hr volumes and bid prices stand this morning...

[Its About Sharing]

So it's effective emediatly but there is no price listed? At least no obvious link or price on there page. I'm confused, am I missing it somewhere?

I think you are right. A bit Gox like as far as sparse explanations go.
Wouldn't it be nice if Bitpay had a ticker showing it?

Regarding the effect to the customer (e.g. - us), I don't really see it. For example, if you buy something for $100 USD and pay via Bitpay, regardless of the price of Bitcoin, it is bought and sold at the time of the transaction (unless Bitpay wants to take a chance and stay in BTC). The important difference to the customer will be the spread of the BTC price and not the BTC price.

So, shouldn't Bitpay be looking at the closest spread and not most consistent price (2 of 3 exchanges)

IAS

[Vanderi]

MtWhat?

[EuroTrash]

gox is still around?

Mount What?

umount -l /dev/gox

[thoughtfan]

So it's effective emediatly but there is no price listed? At least no obvious link or price on there page. I'm confused, am I missing it somewhere?

I think you are right. A bit Gox like as far as sparse explanations go.
Wouldn't it be nice if Bitpay had a ticker showing it?

Regarding the effect to the customer (e.g. - us), I don't really see it. For example, if you buy something for $100 USD and pay via Bitpay, regardless of the price of Bitcoin, it is bought and sold at the time of the transaction (unless Bitpay wants to take a chance and stay in BTC). The important difference to the customer will be the spread of the BTC price and not the BTC price.

So, shouldn't Bitpay be looking at the closest spread and not most consistent price (2 of 3 exchanges)

IAS

BitPay has in the first instance (for their merchants requiring fiat conversion) to be doing transactions at a rate that enables it to immediately pass the transaction on to an exchange.  Unless they are going to be determining rate to the customer on the size of the order (by calculating it from the order book) the most important thing is liquidity so they don't lose out on slippage.  With only 1% charged on to the merchant I can't see how they could select the exchange that would best suit the customer without risking losing their margin on slippage.

I think the point of showing their rate based on a single bid price is that it is simply passing on the rate it will be getting itself for the conversion.