Crypto indexes can offer insight into the performance of the entire crypto industry, as well as the performance of specific sub-sectors of the markets.
There are several crypto indexes you should know about. Some exist merely for analytical purposes; others allow you to invest capital into the index.
With that in mind, here are five crypto index that you should check out.
In 2018, the Bloomberg Galaxy Crypto Index was formed out of a partnership between Bloomberg and Galaxy Digital Capital Management. It aims to provide one of the most transparent benchmarking tools for crypto investors.
The index tracks the value of the largest cryptocurrencies in terms of market capitalization. The most recent data available at the time of writing (August 2019) shows that the index only includes six tokens. They are Bitcoin, Ethereum, XRP, Litecoin, Bitcoin Cash, and EOS. The majority of the index is divided between Bitcoin (30 percent) and Ethereum (29 percent).
As per the rules of the index, no token can have an allocation of more than 30 percent. The maximum number of different coins that Bloomberg Galaxy Crypto Index can hold is fixed at 12.
Rebalancing takes place at the end of every calendar month. In order for a token to be included, it must have a median daily value traded of $2 million and have a free-floating price. Stablecoins, therefore, are excluded.
The index was assigned a base of 1,000 points on the launch day (May 3, 2018). It is currently worth around 400 points.
CCi30 is a cryptocurrency index of the top 30 coins in the world by market cap. As with the Bloomberg Galaxy Crypto Index, CCi30 excludes stablecoins or any other tokens with artificial prices.
To avoid too much fluctuation in the index’s constituent tokens, it uses an exponentially weighted moving average of the market capitalization. The number of tokens was set at 30 because it is the lowest number needed for the indexes results to be statistically significant.
It means the margin of error when considering the index as a reliable indicator of the performance of the entire crypto sector is just 1.1 percent. And, at the time of writing, anyone looking at the CCi30 would see 92.2 percent of the entire crypto market cap represented.
Because of the high correlation between the index and the market, the performance of the index since its launch in January 2017 has closely followed the bull run of 2017 and the subsequent crash of 2018.
Another cryptocurrency index that is not an investable fund is CRIX.
Unlike some of the alternative indexes, CRIX doesn’t merely set an arbitrary number of constituent assets or a minimum or maximum percentage allocation. Instead, the index includes all crypto assets that are higher than the 25th percentile by trading volume using the Laspeyres construction. The Laspeyres approach ensures that changes in the index are being driven by price, rather than by fluctuating supply.
As such, the number of assets can vary considerably. At the moment, there are just four tokens included in the index (Bitcoin, Ripple, Bitcoin Cash, and Litecoin). As recently as March 2019, there were 55 tokens in the CRIX index.
The underlying assets are only rebalanced every quarter; the percentage allocations of the assets are rebalanced every month.
The TaiFu Indexes are a family of three market-capitalization-weighted baskets.
The three indexes are the TaiFu 30 Cryptocurrency Market Index, the TaiFu 30 Altcoin Market Index, and the TaiFu Bitcoin “Ma Bell” Aggregate Index.
TaiFu 30 Cryptocurrency Market Index
The TaiFu 30 Cryptocurrency Market Index is similar to CCi30. It takes the top 30 crypto tokens by market cap and tracks their performance. However, instead of a monthly rebalancing, it uses a daily rebalancing. That means the snapshot of the top 30 will be more accurate at any given time—though that doesn’t necessarily lead to better performance.
TaiFu 30 Altcoin Market Index
As the name suggests, the TaiFu 30 Altcoin Market Index tracks the performance of the top 30 coins by market cap, excluding both Bitcoin and any Bitcoin hard forks such as Bitcoin Cash. This index, therefore, is designed to give investors insight into the performance of the altcoin sector.
Once again, the rebalancing happens daily.
TaiFu Bitcoin “Ma Bell” Aggregate Index
The TaiFu Bitcoin “Ma Bell” Aggregate Index is the exact opposite of the TaiFu 30 Altcoin Market Index. It only tracks the performance of Bitcoin and any other tokens that a) share the same Bitcoin genesis block as created by Satoshi Nakamoto in January 2009 and b) are in the top 30 coins by market cap.
At the time of writing, just three coins are included. They are Bitcoin, Bitcoin Cash, and Bitcoin Gold.
The final index in our list is the Lykke Crypto Index. It uses a slightly smaller subset of crypto tokens, including only the top 25 by market cap.
As such, the Lykke Crypto Index is heavily weighted towards Bitcoin. In August 2019, it was responsible for almost 60 percent of the entire index.
The index uses current mid-market prices and data from CoinMarketCap to inform its decisions.
Why Not Create Your Own Crypto Index?
If you don’t like the methodology or the approach of the five indexes we have looked at in this piece, why not use an app like Hodlbot to make your own crypto index?
You can choose which tokens to include, decide how your index is weighted, and set a customized rebalancing period. You can even ask Hodlbot to automatically trade your index on both Binance and Kraken.
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