How Is Our Bitcoin Price Index Calculated?
Every second we calculate weighted averages within each currency according to trading volumes, liquidity, activity and other factors. This enables us to provide the most rounded bitcoin price. In our API these averages are referenced as “local” prices.
Weighted averages are calculated for last price, bid and ask separately. These weighted averages are shown on our frontend as currency markets data. Of all globally recognized currencies, only around a dozen are shown in the market area. This is because we recognize as markets only currencies that are directly traded to BTC anywhere in the world.
You may notice that the currency market prices can vary wildly from each other, this is because certain countries have a more difficult barrier to entry than others, this can cause large premiums where bitcoin is traded to a specific currency.
Using the calculated currency market averages we then generate a global average bitcoin price.
Firstly each currency market average price is converted to USD using global exchange rates. We then use the daily volume in each market to provide a weighting factor to its price.
A final calculation is then performed to generate a Global Bitcoin Price in USD that encompasses all bitcoin exchanges, and factors in their traded currencies and trading volumes.