CoinDesk Inc., a bitcoin-focused media company, has acquired analytics company TradeBlock Inc., in a bid to capitalize on demand for data-driven products in the burgeoning cryptocurrency industry.
TradeBlock is a data and trading firm that publishes both free and subscription data. Its most notable product is a bitcoin price index called the XBX that is used as the reference rate, or benchmark price, for investment funds such as the
Terms of the deal weren’t disclosed. CoinDesk is owned by Digital Currency Group, or DCG, which had been a minority investor in TradeBlock. DCG also owns Grayscale Investments, which sponsors the bitcoin trust.
Reference rates are an important feature of the traditional capital markets, used in areas such as exchange-traded funds and lending rates. They offer transparency and standardized pricing, which helps improve liquidity and lower costs to investors.
The TradeBlock deal illustrates how important data and indexes are becoming to the industry. The price of
has nearly quintupled since the beginning of 2020, setting a new high above $34,000 Sunday, driven by a wave of investors looking to ride its momentum. The renewed interest has spurred demand for more sophisticated ways to track and trade cryptocurrencies.
CoinDesk, which built its business around news, hadn’t previously tried to make a profit off its own data products and price index. This deal, said Chief Executive
Kevin Worth,
“is a recognition that the market has shifted.” CoinDesk operates a website that gets about five million views a month and hosts live conferences, including the annual Consensus conference in New York that is the industry’s largest.
In another recent example of the rush to collect better data, S&P Dow Jones Indices, which manages the S&P 500 and Dow Jones Industrial Average indexes, unveiled plans to launch a bitcoin index in 2021.
Unlike in the stock market, where all the data come from centralized exchanges, bitcoin and its crypto competitors trade on hundreds of large and small digital exchanges around the world. That results in a situation where no one price is definitive.
Creating an industry-recognized standard, assuming the crypto market keeps growing, is a potentially lucrative opportunity.
CoinDesk, founded in 2013, began publishing a bitcoin price index the same year, becoming one of the more recognizable reference rates. But CoinDesk’s index was built more as a narrative device—it is a volume-weighted average of prices on 10 indexes—than a product that could be licensed and used to build other financial products, Mr. Worth said.
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TradeBlock, also founded in 2013, has built a business around its XBX index. It has raised $53 million in venture funding, with investors including Andreessen Horowitz, Y Combinator and DCG.
Grayscale’s bitcoin trust fund, which uses TradeBlock’s XBX as its reference rate, has recorded a sharp rise in assets under management over the past few quarters as more investors enter the sector. Assets in the trust, which trades on the over-the-counter exchange OTCQX, surged to $20.2 billion at the end of 2020 from $2.56 billion in June 2019.
According to the details of a 2017 licensing agreement, Grayscale pays TradeBlock a set monthly fee and a volume-based fee based on the value of the trust’s assets.
Write to Paul Vigna at paul.vigna@wsj.com
Corrections & Amplifications
CoinDesk’s Bitcoin Price Index is a volume-weighted average of prices on 10 indexes. An earlier version of this article incorrectly said the index was a simple average of the prices on three exchanges. (Corrected on Jan. 5)
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