A Guide to Major Cryptocurrency Indexes
Most of us keep a track of the Cryptocurrencies by their price points. Popular sources like Coinmarketcap provide a detailed overview of not only the digital coins but the Crypto exchanges as well. The metrics for Cryptos include Price, volume, circulating supply, change in price & charts. Another one of my favorite source which provides Price change visuals for the Cryptos is Coin360 — they are planning to add the Crypto exchanges section to their visual platform soon.
The Crypto industry is still in its fledgling stage — but in a constant state of flux, with new players entering the industry in different sectors. The biggest conundrum for the digital coins is the reliability of quality information out there. While there are quite a few resources out there but not all of them can proclaim to be reliable. Today, we will be looking at some of the pronounced Crypto Indexes — which track the performance of a bucket of cryptocurrencies on a pre-defined set of metrics.
Cryptocurrency Index 30 (CCi30)
Perhaps one of the oldest Crypto indexes out there & the one that I have been following the longest. The Cryptocurrencies Index 30 (CCi30) was launched on Jan. 1, 2015 with the starting value set arbitrarily to 100. The index was created by a team of academics, industry experts & Tech gurus — Igor Rivin, (Professor of Mathematics at Temple University), Carlo Scevola (Economist and president of CS&P) & Robert Davis as the Programmer and IT expert. The index reflects the top 30 cryptocurrencies adjusted by market cap to get a broader representation of the market. However, the market cap is not computed randomly at any given moment but calculated by exponentially weighted moving average of the market capitalization which reduces the effects of the massive volatility in the Crypto market. If you are looking for more details on the calculation method you can consult the index methodology manual.
The index is currently being used by Cryptos Fund as a benchmark tool for its passive investment strategy. Several data providers broadcast the index to their clients as a means of keeping a tab on the broader Crypto market. CCi30 is the industry equivalent of the ETFs & other passive investment funds as it diversifies the risk of investing in any single digital coin. The value of the index, daily/monthly/yearly prices changes, Ask/Bid spread & 52-week highs/lows are being updated in real-time on their website. Price data for the index calculation is taken from Coinmarketcap.
Bloomberg Galaxy Crypto Index (BCGI)
A more recent but a significant addition to the index list has been the Bloomberg Galaxy Crypto Index (BGCI), which tracks the performance of the largest cryptocurrencies traded in the US Dollar. It was launched on May 03, 2018 with the base value set to 1000. As the name suggests the index is owned & managed by the global business giant Bloomberg in partnership with Galaxy Digital Capital Management. As per the fact sheet for the index, Bloomberg manages the index on the principles of data integrity, diversification, representation & continuity. The BCGI index also follows a stringent selection criteria for the digital coins to be included in the index valuation. No single digital coin can contribute more than 30% or less than 1% of the market cap of the index. Here are some of the other key points:
- Two pricing sources to meet Bloomberg’s due diligence criteria with trades in USD.
- 30-day Median daily value of $2 million traded on those two pricing sources.
- Free-floating price would be included — no pegging of the value to any asset is allowed.
- Maximum number of index constituents are limited to top twelve by market cap.
- Hard forks in Cryptos are considered on the same criteria as the established coins.
- Any cryptocurrency to be included in the index needs to follow the above eligibility requirements for three consecutive months.
The U.S based digital exchange giant introduced their very own Coinbase Index which tracks the performance of the Crypto assets listed on the exchange only. The overall value of the index is calculated based on the weighted value of digital assets based on their market cap. However, the index takes into account not just the price of the Cryptocurrencies but the increase in the supply of the digital coins as well. The index was first introduced on Mar. 06, 2018 (version 1.0) with a revised version 1.1 released on Oct. 03, 2018 with further improvements — the baseline for the index is set to 100 which corresponds to the first limit order book exchange on Jan. 01, 2015. The index uses price points from its native Coinbase platform. Keep in mind though the index is limited in scope & coverage as compared to the previous indexes as only Cryptos listed on Coinbase platform are included, which are eight in total at the time of writing. The index gets revised every time a new asset is listed on the platform to include it in performance tracking as well. More details about specs. & calculations of the index could be found here.
Huobi Index (HB10)
To help make Cryptocurrency trading easier for the investors Huobi — the third largest Crypto exchange by volume decided to launch its own HB10 Index consisting of the 10 most highest volume coins traded against USDT. The index was launched on May 23, 2018 with the base value set to 1000. The sample for the index is the entire ecosystem of the Huobi Pro platform. The index is calculated using the Pasche weighted composite price index. The average daily of volume of the previous quarter is taken as the core metric of the sample selection. The component coins of the Index at the time of the writing were BTC, EOS, ETH, XRP, BCH, HT (native Huobi token), LTC, ETC, ONT, IOST. The percentage of individual components changes in real-time & can be tracked on the Index page. Unlike the previous three indexes, HB10 uses USDT (Tether) instead of USD as they better reflect the actual volume of digital transactions taking place. This is true since most of the Crypto exchanges don’t allow Fiat to Crypto pairs. You can download the principles of HB10 Index here.
Bitmain Big 10 Index (BLC10)
Most recently on Nov. 28 2018, Beijing-based Bitmain & one of the biggest Crypto miners in the World, launched its own BLC 10 index which tracks ten of the most largest, most liquid digital assets in the market, denominated in US dollars. The top 10 digital assets are chosen from a bucket of 17 constituents. The data of these top-performing Cryptos will be collected from reputable digital exchanges who have high trading volumes and are compliant, stable & transparent. For now Bitmain, is using Bitfinex, Binance, Bitstamp, Bittrex, GDAX, Gemini, Huobi (Fire Coin), Itbit, Kraken, OKEX & Poloniex. The index covers more than 90% of the total market cap of the digital assets with a diversified mix of constituents including decentralized platforms & privacy coins among others. Although the index gets updated in real-time to reflect the price changes in the value of the assets, but the reference price is published once daily at 10:00 am Hong Kong time. Here are more details on the Index methodology.
Indexes have been utilized by investors over the years in the traditional financial markets to not only gain broader exposure to the markets but also to diversify their portfolios especially during times of volatility & uncertainty. The Cryptocurrency indexes are a useful addition to the Crypto investment mix with the recurring volatility in the digital coins. And as a really rough year comes to an end, the digital assets continue to gain traction with institutional adoption which is sign of maturing markets albeit at much lower prices levels & volatility.
Massive fines, tightening regulatory oversight & increased competition from the Fintech companies around the world has…medium.com
Before you get confused let me clarify the term BaaS — Blockchain as a Service. It is pretty similar to the well-known…medium.com
Let’s start off with a little description of the investment tool called Sukuks. They have become a very popular form of…medium.com
Curating good content is not easy. It take a lot of time, effort & searching different sources to bring quality content…medium.com
Originally published at www.datadriveninvestor.com on December 6, 2018.