Market Transparency

Since the early beginning of Bitcoin there have been many initiatives to start online Bitcoin exchanges. These Bitcoins exchanges have been through rough times with legislation, uncooperative financial institutions and computer hackers. Several were forced out of business.

This volatile environment makes it an even greater challenge for the exchanges to be trusted by the people to deposit funds on their trading accounts. As a result the exchanges have become very transparent about their business model, the market depth and clearing price. This suits well with the nature of the Bitcoin system, where the full transaction history is available for everyone and the software is open source.

Because so much data is publicly available for free, it is an interesting source for analysis and visualization. Many of which are not possible, or only with expensive trading data services, in the traditional financial world.

One example of a radical different way of visualizing the ongoing process of reaching the market equilibrium can be seen on the webpage http://www.mtgoxlive.com. This page shows the near real-time development of the bid-ask spread and the last clearing price based on the full bidding ladder of the MtGox exchange. It gives insight on the robustness of the current price levels and the direction the market is moving. At the same time it helps to understand that the market ticker only shows the result of the last trade and the possible delta price that a next trade will create.

An alternative example is the market depth graph on http://www.happycoins.nl/market. This graph also shows the near real-time spread in Euro of the MtGox exchange, with the average Bitcoin price depending on the size of the trade. When trades become larger, also will the spread, as is very visible. Often a series of small trades make a better average price than one big trade, even with a higher commission.

Transparency is the base of a good functioning market, and the Bitcoin markets show a great amount of transparency even without the need of a regulatory body.

Inge