Last updated on May 1st, 2014 at 11:20 am
It was reported on the company’s corporate blog that Bloomberg would be utilising data from two Bitcoin markets – Kraken and Coinbase. The latter of the two positions itself as a Bitcoin payment processor, which offers currency conversion services, while Kraken is a dedicated cryptocurrency and fiat exchange.
“Bloomberg is the Michelin Guide of the world of finance. Once an asset is tracked by this institution, it begins to matter in the eyes of asset managers—much like when a restaurant is mentioned by Michelin, it exists in the eyes of the culinary world.
This is potentially a huge milestone in the history of crypto currencies. Once institutional money really starts flowing in, it will lift the tide and raise all the boats of Bitcoin entrepreneurs. That in turn could create a Windows 1995 moment for private digital currencies.
The market cap of the S&P 500 is currently $16.7 trillion, up 119% from $7.7 trillion just 5 years ago. Many analysts argue, and I agree, that a lot of that $9 trillion reflation is due to the aggressive Fed stimulus programs, and that a correction is overdue. Let’s assume this stock bubble does deflate and a small part of the market decides it wants to diversify away from the dollar, then we could see an enormous rally happen in Bitcoin and the altcoins: just 0.33% of that bubble already represents an influx of $30 billion.”
It’s worth observing that the perhaps the biggest names in Bitcoin to fiat conversions have not been included in Bloomberg’s data sources. Those are Bitstamp and BTC-e, which are based in Slovenia and Bulgaria, respectively. Coinbase and Kraken are both based in San Francisco, USA. Both of these US based businesses have been working toward regulatory compliance in the United States, which has slowed progress at times. The inclusion of their data on Bloomberg may provide exposure to help with the European based Bitcoin markets.
Further to providing market data to its professional subscribers, Bloomberg says it will also provide “related virtual currency news and social media posts from more than 100,000 sources.” As The Wall Street Journal noted, however, Bloomberg’s move does not serve to standardize prices. An example of a service that is providing a weighted price index for Bitcoin is the CoinDesk BPI.
In its blog post, Bloomberg outlined its three main reasons as to why it decided to include Bitcoin data in its services:
“Transparency – Bloomberg was founded to provide transparency to opaque financial markets and we believe all markets, even digital currencies, greatly benefit from increased transparency.
Client demand – Serving the needs and objectives of clients has always been a guiding principle of Bloomberg. Clients are increasingly interested in Bitcoin and other digital currencies and are looking for tools to better monitor developments in these markets.
Innovation – While bitcoin and other virtual currency markets are still nascent, they represent an interesting intersection of finance and technology. Given that Bloomberg sits squarely at that intersection, providing pricing for this underdeveloped market is a natural fit for us.”
While some in the Bitcoin community have taken this move as an implied endorsement of Bitcoin, Bloomberg stated that it does not endorse, or provide guarantees on, Bitcoin:
“It’s worth noting that we are not endorsing or guaranteeing Bitcoin, and investors cannot trade Bitcoin or other digital currencies on Bloomberg. Global interest in digital currencies has undoubtedly increased, but these instruments still represent a fraction of fiat currency usage. Reaction from governments around the world to digital currencies has been mixed and the regulatory environment remains very unclear. And while Bitcoin has thus far survived intense media scrutiny, scandal and wild price swings, there certainly is no guarantee that Bitcoin will persevere.”