A cryptocurrency index is a percentage that indicates the performance of a set of cryptocurrencies related to stock market indices like the S&P 500. Investors can use these indices to measure and predict how healthy, and in what direction the cryptocurrency market is moving.
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Several major indices and index funds are now available, each with unique compositions and strategies:
S&P Cryptocurrency Indices
S&P Dow Jones developed these indices in order to make transparency the order of the day, by tracking the performance of cryptocurrencies such as Bitcoin and Ethereum. Blended strategies, for example, combine crypto futures with equities, providing investors with ways to effectively manage risk through, say, futures-based indices.
Some key indices within this family include:
- Bitcoin S&P Index – a measure of the price of Bitcoin.
- Ethereum – which is focusing on the S&P Ethereum Index.
- Bitcoin and Ethereum combined to track top-tier activity in the market through the S&P Cryptocurrency MegaCap Index.
The index reflects the broader crypto market and is calculated on S&P Cryptocurrency Broad Digital Market (BDM) Index, which measures over 240 cryptocurrencies, in addition.
This family of subset indices excludes large assets such as Bitcoin and Ethereum, generating more notional select views of the remaining portions of the market. In these indices, pricing data was sourced from Lukka, a crypto data provider, for institutional grade accuracy.
Bitwise 10 Cryptocurrency Index Fund (BITW)
The portfolio in this fund consists of the top 10 cryptocurrencies by market cap, concentrated heavily in Bitcoin and Ethereum, accounting for over 90 percent of the portfolio. Its simple exposure, except its high expense ratio (2.5%) was criticized versus direct crypto investments.
Today, the price of the fund is around $36.40 with over 160% year-over-year growth. The fund’s composition shifts frequently, based on market trends and it excludes to comply with standards.
BITW is listed on the OTCQX market, which means it is a more publicly accessible stock to the retail investor.
Bloomberg Galaxy Crypto Index (BGCI)
The fund consists of 12 main cryptocurrencies and is rebalanced monthly, with no more than 35% of anyone holding. With this strategy, we reduce overreliance on Bitcoin and Ethereum and have a more balanced exposure to things like Solana and Polygon. The BGCI experiences a monthly rebalancing which does not fundamentally disrupt its structure, in response to market shifting.
Current data shows the index contains Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Avax (AVAX), and others including the likes of Polkadot (DOT). Only those assets that have high trading volume (USD) and which are compliant with Bloomberg’s pricing standards are included.
Institutional investors looking for more diversified ways to add to the crypto market without managing individual assets will find this index especially useful. Bloomberg provides intraday levels calculated every second, and the index is in effect during NYSE trading days.
Nasdaq Crypto Index (NCI)
It’s an index that tracks 11 cryptocurrencies, and though it is very Bitcoin and Ethereum heavy (it uses quarter rebalancing methodology to stay with the markets). The Nasdaq Crypto Index (NCI) is a benchmark to measure a multi-dimensional part of the cryptocurrency market representing the performance of the digital asset market overall.
It was put together to offer institutional investors a standard index for measuring and investing in this new asset class. The index is dynamic and changes as the market changes and as components remain representative of industry trends.
NCI is a collection of multiple cryptocurrencies meant to broadly diversify exposure to various corners of the market. Changes are tracked 24/7 and information is updated in real-time to create calculated numbers for investors.
The Index generally rises and falls in tandem with the market till October 2024, registering around 3,401 points. Nasdaq has detailed resources and licensing options for those interested in using the NCI in financial products or ETFs if so.
CoinDesk Indexes
Among other things, CoinDesk Indices offers several cryptocurrency benchmarks that track and test the digital asset market. Some key indices include:
CoinDesk 20 (CD20)
A benchmark of the broader crypto market, a diversified index of each of the top 20 digital assets by market liquidity. More partly it contains crypto main assets such as Bitcoin, Ethereum, Solana, XRP, and Cardano; Bitcoin holds above 30% of the index and Ethereum around 20%.
CoinDesk Market Select Index (CMIS)
This index concerns itself with just one slice of high-performing assets. It is a dynamic portfolio that has just gotten a recent reconstitution in October 2024 with Akash Network and NEAR Protocol joining in its portfolio. CMIS sub-indices include categories that are decentralized finance (DeFi) metaverse tokens along with Bitcoin and Ethereum there.
However, these index products try to simplify crypto investment by bundling multiple assets into one and they range from having different expense ratios and certain management strategies.
That means the index chosen should depend on the investor’s risk tolerance, the amount of exposure he or she prefers to take, and whether it wants to pay the attendant management fees.