With the increasing popularity of cryptocurrencies, investors are considering the possibility of introducing traditional investment tools for assessing and forecasting the industry. Among the most popular solutions are indexes and funds based on them. The cryptocurrency index fund of Bitwise Asset Management provided investors with 45% profit in the first two months of this year, while many suffered losses.
Stock and Cryptocurrency Indexes
An exchange or stock index is a composite index calculated on the basis of prices of a certain group of securities, which serve as an indicator for investors of the general direction of development of a particular industry or market. Depending on the principle behind the selection of assets, the index can display the price dynamics of a group of securities, a specific market sector, or a broader stock market of shares. Stock indexes are also a convenient investment tool.
Cryptocurrency indexes also enable investors to track the performance of the crypto market without having to study each cryptocurrency separately. Cryptocurrency indexes are based on market capitalization and are revised daily, weekly, monthly, or quarterly. Investors can invest in a portfolio of cryptocurrencies offered by the index, thereby saving time and money. A large investor can enter the market with a technical assessment of the index, while small investors will be able to avoid the problem of a minimum deposit. Indexes also serve as a good alternative to portfolio diversification for any investment.
Bit20 is a cryptocurrency index fund, represented in the form of a smartcoin based on the Bitshares financial platform. This index includes the 20 largest cryptocurrencies by market capitalization, except Ripple. On the 21st day of each month, Bit20 runs an algorithm to create the new composition of the index, which adds new positions and rebalances those already existing. To date, its rate is $735,502.
The CAMCrypto30 index is issued by the Crypto Asset Management fund of Tim Enneking. This index is based on the Russell 2000 and FTSE 100 stock indexes and is calculated on the basis of the 30 largest cryptocurrencies by market capitalization. Rebalancing of the index occurs monthly to account for price fluctuations in a basket of crypto assets, and their price is recalculated every 5 minutes. The official web page also contains an embedded widget for third-party sites, which allows for tracking the index data online.
The CCi30 index (CryptoCoin Index) was launched in October 2017, by a team of specialists led by Igor Rivin, a professor of mathematics at Temple University and royal professor of mathematics at the University of St. Andrews, as well Carlo Scevola, a specialist in the field of legal and financial consulting services, and Robert Davis, an engineer, IT expert, and programmer.
The index includes 30 cryptocurrencies with the largest market capitalization, where each of the crypto assets is assigned a weight. A full recalculation of the components of the index basket in CCi30 occurs quarterly, while the weight of the components is recalculated monthly. The CCI30 index allows for the creation of a balanced portfolio that maximizes profits and minimizes risk and volatility. Thanks to that, the CCi30 is now used by the Cryptos Fund for passive tracking of cryptocurrencies' rates.
One of the first cryptocurrency indexes is CRIX (CRyptocurrency IndeX) which was launched in mid-2016 by the University of Management of Singapore together with Ladislaus von Bortkiewicz Chair of Statistics at the University of Humboldt in Berlin, using data provided by CoinGecko. CRIX uses a market-weighted average system and includes 20 cryptocurrencies, which were chosen statistically by the size of their market capitalization, and their weight is recalculated in real time. The peculiarity of the index is the methodological basis for its calculations, which is available in the public domain. Several scientific works on economics have been written on its basis.
CRYPTO20 is the first tokenized hybrid index fund, which includes 20 cryptocurrencies with the highest market capitalization and conducts a weekly rebalancing. This index fund has its own token, the C20, which represents the investor's share in CRYPTO20. When buying this token, investors also invest in the cryptocurrencies presented in the index. The maximum weight of the elements of the CRYPTO20 index basket is 10%.
The DeCenter DCI and DCI50 cryptocurrency and token indexes work on the same principle as stock indexes. The DCI includes 10 cryptocurrencies and tokens with the highest capitalization, while DCI50 includes 50 of them, not including Bitcoin. The list of cryptocurrencies is recalculated quarterly and contains cryptocurrencies and tokens with the highest market capitalization for the previous 90-day period. The initial value of each index was $1,000 converted into Bitcoin and divided equally between 10 and 50 coins, respectively. The price of Bitcoin on January 1, 2015, was $314.15, and the value of each index was 3.18 Bitcons. To date, DCI is equal to 5.84 BTC, and DCI50 is equal to 12.8 BTC.
DLT10 is one of the first cryptocurrency indexes created by DLT Financial Group and the London-based Tramonex financial company in September 2016. The index includes the top 10 cryptocurrencies by market cap, including Bitcoin, Ether, Ripple, Lumens, Litecoin, Dogecoin, MaidSafeCoin, NameCoin, Factom, and NXT. The index is recalculated weekly, at 5:00 PM London time. DLT10 provides the necessary information value and interaction between the largest cryptocurrencies on the market.
At the end of 2017, Bitwise Asset Management launched HOLD 10, a managed index fund of 10 cryptocurrencies, taking into account their market capitalization. Each of the cryptocurrencies presented in the index should be traded on several exchanges, their monthly trading volumes should exceed 30% of circulating supply for the past 3 months, and they must have a free-floating price and not be pegged to fiat currencies or other assets. The Fund monitors and weighs the rate of top 10 cryptos adjusted for inflation of market capitalization, given the supply schedules for the next five years. Revision of the list of coins takes place on a monthly basis. According to published information, the HOLD 10 index brought investors 45% of profit in the first two months of operation.
The ICEX Top10 Index was developed by a team of developers from Russia and CIS countries at the end of 2017. It consists of equal shares of the 10 largest cryptocurrencies by market capitalization and liquidity. At the same time, the capitalization of a cryptocurrency asset should be no less than $500 million, and the average total daily trading volume on all exchanges must be at least $10 million over the last seven days. At the same time, sales of the selected coins should be carried out at five or more exchange platforms. The change in the value of the ICEX Top10 index occurs with each new transaction on trading platforms. In addition, each coin included in the ICEX Top10 index has its own separately calculated index.