Upbit announced UBMI index to make it standard for cryptocurrency industry
What is a limitation of Upbit , the biggest cryptocurrency exchange in the world ?
Recent movement of Upbit exchange is not common. It's so future-oriented and agressigve. There were three new list up in Upbit - EOS, ICOIN, STORM at the same time. Not only this is a drastic movement but also lucrative. They announced that they will provide 5% payback of deposited those three coins by giving Bitcoins to customers. Even they will not receive any brokerage commision for seven days. As you saw, they are doing so well in this industries.
And once again, Upbit exchange surprised the world.
By announcing their own standard index of cryptocurrency market, they showed confidence and superiority to other exchanges including other companies related to cryptocurrency industry.
It is UBCI(Upbit Crypto Index), specifically UMBI(Upbit Market Index).
So now, we are going to talk about this new standard made by Upbit and probe into how it is made and used.
In conventional market such as stock market or bond market, there were many quantitive research methods. As we commonly use KOSPI, KOSDAQ, DOW Jones Index, a variety standards that make us easy to understand circumstances of market. But there were not for cryptocurrency market eventhough we used to use a term "Premium" to understand price differences between exchanges from other countries. Actually many people thought that it was required for us to have well-made standard, index to understand precisely and easily. As a result, this is the reason why Upbit announced their own UBMI index which is very useful for customers. We can know situation of market intuitionally if we use this kind of index.
What is UBMI (Upbit Market Index) ?
1) What is UBMI ?
UBMI covers all of coins listed up in Upbit exchange. And by using this index, we can understand market situation easily and quickly. Even we can anticipate the result of our investments. Just imagine that there is another Dow Jones Index in cryptocurrency industry.
2) How to calculate UBMI ?
To calculate UBMI, Upbit use a weighted market capitalization method. To explain, calculation method is like following.
"Price of each cryptocurrency * Amount of current coin * Ratio of specific cryptocurrency versus total Market capitalization"
But we can expect that some coins will be listed up newly and some coins will be delisted in Upbit. Then there should be distortion of not only total market capitalization but also index itself. So Upbit has a plan for this kind of change.
3) How many indexes will they provide?
Surely, they have a plan to provide five kinds of index. Principle of index is not that different but they just imply different perspective of market. Just think about top10 altcoin market and top30 altcoin market. It's different so index should be disparate as well.
Detailed Contents
1) Composition of Index
In a nutshell, to calculate UBMI, all coins will be included into index. Each coin's price, market capitalization, ratio versus total market capitalization will be used. But as we can expect, there would be some changes because of listing and delisting of coins. And also there would be airdrop event which will increase of an amount of current coin. Then upbit will calculate according to a policy that they determined how to. So it should be trustworthy.
2)Weighted method
If some coin cosists only 10% of total market capitalization, we should make this coin have an effect on 10% to Index that we want to use. If it has 50% of influence on index, it's totally trustless and unreliable. To solve this problem, we should use Weighted method.
3) Price and the amount of current coin
Because Korean use Korean Won(KRW), price should be based on KRW. As you know, price of altcoin can be calculated by multiplying "BTC satoshi * Price of bitcoin in KRW". Upbit will calculate in this way.
How about amount of current coin? Upbit will use Cryptocurrency Market Capitalization, as you can see, it's coinmarketcap.com. If some coin is burned and deposited in Escrow, then the amount of current coin should be decreased. Increse of amount of current coin by compensation for mining should be considered as well.
3) Start of index
UBMI will be based on the date of 1th October of 2017
4) How to calculate UBMI
Index will be rounded off from second decimal. It starts from 1000.00.
5) What happens when new coin is listed up in Upbit
After including new coin which is newly listed up, there would be some distortion in Index because of increased total market capitalization and amount of current new coin as well. And even there would be price pumping. So to stablize value of the index, Upbit will start to include data after 7day of listing up new coin.
5)What happens when some coins are delisted in Upbit
There would be some changes when coins are excluded by Upbit for some reasons. It's requried to measure new data and to calculate, to ordinate again not to make distortion in Index.
Note
Upbit will announce another four indexes more. Market Index(UMI, Upbit Market Index), Sector Index(USEWI, Upbit Sector Equal Weighted Index), Bitcoin Index(UBI, Upbit Bitcoin Index), Strategy Index(USI, Upbit Strategy Index). These four index will be officially released around coming April.
Upbit Index
https://drive.google.com/file/d/1iuPBfkVnMrDUn2RysibuDXgxnhcm_7DP/view
Summary
Upbit exchange developed their own Index standard of cryptocurrency market by researching transaction data.
And they are trying to make their index dominate cryptocurrency industry and it looks very aggressive and valid strategy coinsidering recent crypto industry.
But eventhough we can know some information about market, the original data which is used for index is from Upbit no entire cryptocurrency market so there would be a limitation.
Anyway, It looks awesome !