I’ve decided to come up with a new index to measure how suitable a coin is for generable purpose commerce.
For a consumer to hold a coin in their wallet, they want good liquidity and low volatility. Similarly the merchant on the other side of the transaction want the same two properties.
Good liquidity allows exchanging into the coin and out of it without too much loss in exchange rate (in detailed terms this is a factor of buy and sell spreads in an exchange market and the volume of buy and sell orders).
Low volatility means the price is relatively stable and will not swing wildly day to day.
This graph above is the Commerce Index of Bitcoin. It’s showing progress over time and is becoming a safe coin to hold for day to day use and for merchants to accept. This is critical for Bitcoin payments as consumers want a stable currency and merchants want good liquidity to easily cash out into fiat currency.
Incidentally for privacy centric coins such as Monero, Dash, Shadowcoin and the upcoming ZCash, these properties measured in this index will be critical for their success in commerce. I’ll be comparing these coins in an upcoming article to see if they are actually making progress.
Here’s my formal definitions for this indicator:
Commerce Index = Daily Traded Volume / Volatility
Volatility = Price Standard Deviation / Price