The Federal Reserve Bank of St. Louis on Tuesday quietly added four series of cryptocurrency prices to its Federal Reserve Economic Data (FRED) database. The four cryptocurrency time series track prices in U.S. dollars for bitcoin (BTC), bitcoin cash (BCH), ethereum (ETH) and litecoin (LTC).
FRED sources its price data from Coinbase, a leading cryptocurrency exchange. The length of time for price data stretches back to 2014 in the case of bitcoin, 2016 for ethereum and litecoin, and January 2018 for bitcoin cash.
The addition of these cryptocurrencies adds a bit of luster to cryptocurrencies in general and gives economic researchers another arrow in their quivers.
The St. Louis Fed has been more open to the usefulness of cryptocurrencies than other Federal Reserve banks. In a short paper published in January, the authors offered a short introduction to cryptocurrencies and the blockchain technology that underpins them. The authors concluded:
Price volatility and scaling issues frequently raise concerns about the suitability of Bitcoin
as a payment instrument. As an asset, however, Bitcoin and alternative blockchain-based
tokens should not be neglected. The innovation makes it possible to represent digital property
without the need for a central authority. This can lead to the creation of a new asset class that
can mature into a valuable portfolio diversification instrument. Moreover, blockchain technology
provides an infrastructure that enables numerous applications. Promising applications
include using colored coins [promises of payment linked to a bitcoin transaction], smart contracts, and the possibility of using fingerprints to secure the integrity of data files in a blockchain, which may bring change to the world of finance and to many other sectors.
Perhaps the most interesting wrinkle here is that FRED is now offering data for an innovation that many believe will one day replace central banks. Creative destruction in action.