The Economist left an indelible mark on finance in 1986 when it published a tongue-in-cheek financial measure: the Big Mac Index. Now, that metric has come to Bitcoin.
The metric, claimed The Economist, serves as a helpful benchmark for the worth of currencies around the world, also known as the “purchasing power parity” of a currency, or PPP.
That’s because each MacDonald’s burger is identical, no matter which country you visit. But the price changes; with $5, you might be able to buy one Big Mac in the US or two in Mexico. Since each MacDonald’s burger is the same all around the world, a dollar, therefore, appears to go farther in Mexico.
In 2015, tokenized debt securities platform BitBond created software that does the same thing for Bitcoin, called the Bitcoin Purchasing Power Index. It tells you how many Big Mac burgers one Bitcoin will buy you.
There’s a global Bitcoin PPI, which tells you “how many Big Mac burgers you can buy with one bitcoin on average globally,” according to the site. At Bitcoin’s current price, $10,619, that’s 4,456 Big Macs (or 2.5 million calories).
The Bitcoin PPI also calculates local exchange rates to work out how far a single Bitcoin will stretch in a country. In Denmark, a Bitcoin will buy you 2,873 Big Macs. In Mexico, it'll buy you 4,433 Big Macs.
Today, the whole crypto community is celebrating the 10th anniversary of Bitcoin Pizza Day. Exactly ten years ago, Laszlo Hanyecz, a programmer from Florida who also contributed to Bitcoin's source code in the past, made the first documented purchase of physical goods with Bitcoin.
The two pizzas that became famous. Image: Laszlo Hanyecz.
“I just want to report that I successfully traded 10,000 bitcoins for pizza,” Hanyecz wrote on the BitcoinTalk forum on May 22, 2010. He provided several photo...
The PPI also calculates volatility for the global PPI. This year, volatility was highest in April amid the uncertainty caused by the pandemic. During this year’s bull run, Bitcoin was stable while decentralized finance coins—those that powered decentralized lending protocols, stablecoins and exchanges, boomed.
Bitcoin, finally, has a use case.
Disclaimer
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.
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