Through a statement released on May 19, Tuesday, the New York Stock Exchange introduced a new bitcoin index to keep track of the popular cryptocurrency’s value. NYSE Group President Thomas Farley noted, “Bitcoin values are quickly becoming a data point that our customers want to follow as they consider transacting, trading or investing with this emerging asset class.”
According to the statement, the index – designated NYXBT – will “initially feature data from transactions from Coinbase Exchange, the leading US-based bitcoin exchange”. In January, NYSE had invested in Coinbase during its Series C financing.
The move adds some crucial credibility to bitcoin, whose value briefly breached the $1,000-mark in late-2013 before sagging into the $200s by 2015 thanks to flagging interest and initial overestimates of its adoption. As of writing this piece, 1 BTC was worth $233.53. The index will represent the value of 1 BTC in US dollars “as of 4 pm UK time” every weekday.
Bitcoin is an alternate form of currency that exists solely digitally. At present, it can be acquired either by a process called mining or by trading. In mining, the user has to run a cryptographic hashing algorithm on an existing ledger of bitcoin transactions to output data that conforms to predefined limits on its size, using expensive and power-hungry equipment. If successful, a ‘block’ of bitcoins is released by the network and distributed among users according to how much computing power they contributed.
Alternatively, a user can acquire bitcoins by trading on exchanges – either by exchanging other cryptocurrencies for bitcoins or for bona fide currencies. The NYXBT index will be based on what bitcoins are bought and sold for in some reputable exchanges – just Coinbase for now, but could expand in the future to include exchanges like Bitstamp as well.
The blips in bitcoin’s credibility have been prompted by its use by criminals. Before the notorious deep-web website called Silk Road was shut down by US law enforcement agencies in October 2013, it sold drugs for bitcoins. At the same time, since the cryptocurrency’s introduction in 2008, various countries have tacitly approved of its use, albeit as a commodity, not a currency. Their reticence is also rooted in the virtual currency not being backed by any government, leading to occasional but significant swings in its value.
The longest strides in adopting bitcoins have come from the US government, with the state of New York having published draft regulations for virtual currency businesses to operate in July 2014.