Phoenix1 posted this on the wall thread as a quote:
Now, this is really interesting. Basically if Bitstamp and BTCE are near each other in price, then the Gox price is thrown out.
Further, consider what this will due to the volume at Gox. If Gox is always higher, then, I believe this means, Gox will not be getting Bitpay's business. Someone correct me if I'm wrong.
IAS
Quote
To calculate the exchange rate for US Dollars, we pull up-to-the-minute BID prices from three exchanges. We take the 2 that are closest together and toss out the third, so that a bad feed from one exchange will not affect our calculation. Of the 2 rates that remain, Bit-Pay uses the highest BID price as our exchange rate.
Now, this is really interesting. Basically if Bitstamp and BTCE are near each other in price, then the Gox price is thrown out.
Further, consider what this will due to the volume at Gox. If Gox is always higher, then, I believe this means, Gox will not be getting Bitpay's business. Someone correct me if I'm wrong.
IAS
This quote is not new. It has been this way for a long time officially although either their algorithm was more complex than that or at times they over-rode it manually because there have been times before when gox was the outlier but it was still used. My guess on seeing the announcement is that this means of determining price has been discontinued and superseded by the new one where they are specifically excluding gox and using another means (maybe using btce, bitstamp and cbx (although cbx is really small volume in comparison with the other two).
It is a variation on the old way that I have been using as my means of determining price for some time. Hence the spreadsheet that gives me this that I occasionally share:
This is the first time I've seen the mtgox volume at less than 50%. That's quite something. We live in interesting times
