1

How do they know the actual price if it's always changing every second? Is there an algorithm they use to calculate it, or is there an authoritative source that they all go to that tells them what it is?

5

They use the price that people last bought or sold at themselves, across multiple sources.

Usually a site will tell you where they get their reference prices from.

Bitcoin's price is not algorithmic, it is purely from people buying and selling at an agreed upon price amongst each other, and in many places that gets reported publicly. If a buyers thinks they find a good deal on Bitcoin then they will buy at the low price (pushing the price up slightly in that place) and sell on another exchange at the high price (pushing the price down slightly at that second place) until all the prices are the same, this kind of arbitrage keeps the prices in sync.

6
  • Given the tech nature of blockchain, I'm already certain the market has cross-platform trading automated to basically capitalize on this and self-regulates the market to prevent manual traders from effectively making money.
    – Nelson
    Jul 26 '21 at 2:54
  • Some institutions get Bitcoin prices from a cryptocurrency benchmark pricing provider (e.g. CF Benchmarks), but I don't think Robinhood uses such providers.
    – Flux
    Jul 26 '21 at 10:12
  • How do they know the prices that everyone is buying or selling at? Is there a specific equation that everyone uses to get the correct new price when they know what’s been bought and sold?
    – JSNinja
    Aug 4 '21 at 5:34
  • @MoneyNinja trade history is available publicly on all exchanges. they and others just look at that. there is no pricing formula, bitcoin isnt a derivatives contract, its just an asset that some people want and there is less of it over time. if Robinhood had different prices, people notice very quickly and either try to sell high priced bitcoin there for a larger quick profit, or buy low priced bitcoin there to sell in higher priced places for a larger quick profit. This activity alone would make the prices the same across all the exchanges. (Robinhood doesnt currently have withdrawals though)
    – CQM
    Aug 4 '21 at 19:54
  • So they want to come up with the same price in response to what everyone is buying and selling, because they don't want to lose people to other platforms. Makes sense but how do they actually do that if they're not using the same equation to calculate the new price?
    – JSNinja
    Aug 4 '21 at 21:46
2

For example, CNBC uses Coin Metrics as their data provider, which sources their data from

Over 30 of the world’s leading spot and derivatives crypto exchanges

The prices are based on the latest transactions, similar to FX quotes or stock prices.

More specifically:

Coin Metrics stores historical quotes snapshots approximately every 10 seconds for the following 19 markets.

  • binance.us-btc-usd-spot
  • bitfinex-btc-usd-spot
  • bitfinex-eth-usd-spot
  • bitflyer-btc-usd-spot
  • bitstamp-btc-usd-spot
  • bitstamp-eth-usd-spot
  • bittrex-btc-usd-spot
  • bittrex-eth-usd-spot
  • cex.io-btc-usd-spot
  • coinbase-btc-usd-spot
  • coinbase-eth-usd-spot
  • gemini-btc-usd-spot
  • gemini-eth-usd-spot
  • itbit-btc-usd-spot
  • itbit-eth-usd-spot
  • kraken-btc-usd-spot
  • kraken-eth-usd-spot
  • liquid-btc-usd-spot
  • liquid-eth-usd-spot

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