Tag: crypto investing

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Crypto Daily Topic Crypto Videos

Pension Funds Are Investing In Bitcoin!

https://youtu.be/jVgRMjgyDbY

https://youtu.be/jVgRMjgyDbY


“Pension Funds are Investing in Bitcoin” – Grayscale

 

Grayscale’s newly-appointed CEO, Michael Sonnenshein, told Bloomberg that pension funds and endowments are actively investing in the Grayscale family of funds. Sonnenshein’s interview with Bloomberg came on Jan 7.

He further explained the statement: “We have started to see participation not just from the hedge funds, which we’ve seen participation from for a long time now, but now it’s recently coming from other institutions, pensions, and endowments. The sizes of allocations that they are making are also growing rapidly.”

Grayscale has been at the forefront of the recent Bitcoin buying spree, and its holdings now account for roughly 3% of the circulating Bitcoin. The fund manager continues to increase its position by buying even more cryptocurrencies as more institutional investors seek exposure to Bitcoin and other digital assets. 

Grayscale’s total assets under management, or AUM for short, have eclipsed $27 billion across ten different investment products. The Grayscale Bitcoin Trust remains its most popular product by far, with over $23 billion in AUM. Its Ethereum trust is the second most popular product, and it is currently valued at around $3.7 billion, while its Digital Large Cap Fund holds somewhere in the ballpark of $340 million.

Pension funds are starting to follow a hoard of institutional buyers that started to enter the Bitcoin and crypto market in 2020. A survey conducted by Fidelity Investments in late 2020 found that 36% of financial institutions across both the United States and Europe said they own cryptocurrencies or derivatives. Over 25% of the respondents reported holding Bitcoin, while 11% said they own Ether.

According to Grayscale Investments, the institutional interest for cryptocurrency and Bitcoin is intensifying at an alarming rate, with pension funds and endowments being the most recent entrants into the space.

The company’s aggressive Bitcoin buying is likely contributing to the digital currency’s rapid price increase. With more Bitcoin taken out of circulation and miners not being able to produce as much Bitcoin as it is requested, the already scarce asset is becoming even more difficult to get at current prices. Sonnenshein stated:

“This is a verifiable scarce asset, so when there are mechanisms that are removing Bitcoin from circulation, that’s inherently making it an even more scarce asset.”

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Cryptocurrencies

YEarn DeFi Ultimate Review: Everything you should know in 2020 & Beyond

yEarn is a liquidity aggregator that offers automated yield farming through several lending pools. Yearn.finance is one of the most popular yield farming protocols, and it shifts between top DeFi lending protocols like dYdX, Aave, and Compound. 

yEarn is a liquidity aggregator that offers automated yield farming through several lending pools. Yearn.finance is one of the most popular yield farming protocols, and it shifts between top DeFi lending protocols like dYdX, Aave, and Compound. 

yEarn is a liquidity aggregator that offers automated yield farming through several lending pools. Yearn.finance is one of the most popular yield farming protocols, and it shifts between top DeFi lending protocols like dYdX, Aave, and Compound. 

yEarn has also created Y and BUSD pools,  two lending pools on the DeFi platform Curve that consists of top stablecoins such as the USDT, TUSD, USDC, and DAI. 

yEarn has a native token called YFI, that is earned through liquidity money on different pools. YFI is earned by staking liquidity proof. YFI is one of the DeFi tokens launched with no pre-mine and no initial DEX offering.

yEarn Background

Andre Cronje founded yEarn in February 2020. However, yEarn didn’t raise any funds since Andre revealed that he developed the software by himself. Andre is famous in the DeFi community for ‘testing in prod.’ Meaning that almost all his contracts are directly pushed to the mainnet without any formal audits. Andre is always open to losing some money to his smart contract and openly stating that individuals should not bother using the software regarding particular yEarn portions. Andre has managed to control virtually every protocol aspect over the community, including minting new YFI and governance. However, it’s the yEarn community that determines the yEarn protocol.

How yEarn Finance Works

yEarn Finance works in a rather complex way, perhaps because of the protocol’s lack of proper documentation. In reality, however,  yEarn .finance’s protocol is easy to comprehend.

As we have already mentioned, yEarn.finance does move the stable coin funds between dYdX, Aave, and Compound based on the stablecoin pool asset generating a higher APY. Currently, yEarn.finance supports TUSD, SUSD, USDDC, DAI, and USDT. yEarn.finance is itself governed by the community, which will decide the lender protocols it supports and the cryptocurrencies that will be supported over time.

When one deposits stablecoins here, they’ll be converted into equivalent amounts of ytokens. For example, DAI will be converted to Ydai. These can help in YFI tokens earning.

However, yEarn.finance the initial protocol deposits, shuffling them automatically between the dYdX, Compound, and Aave pools with higher yields. Such a protocol will also take a very tiny cut that will be deposited to the yEarn.finance pool. Such can only be accessed by holders of YFI tokens.

There is also the Iborrow.finance that involves tokenizing the debit in other protocols with Aave’s help to ensure it is used in different DeFi protocols. However, only yswap.exchange and yEarn.finance were available at the time of writing this piece.

How You Can Earn YFI Cryptocurrency

Before looking at the three different ways you can begin earning YFI, let us first look at what’s happening behind closed doors. You can send the ytokens Curve Finance’s Ypool, DeFi protocols allowing the trade between low slippage stable coins.

The Curve Finance incentives mining liquidity helps it offers one a return of yCurve tokens generated to provide liquidity for Curve Finance protocols.

Cronje created YFI tokens to allow its users to trade the yCurve using their funds accumulated in the yCurve pool in place of governance of yEarn .finance’s ecosystem.

The first method to earn involves depositing the yCurve to yEarn .finance’s yGov pool.

The second method involves making a 98% to 2% YFI and DAI deposit to the yGov pool into Balancer protocol and exchanging with BAL tokens. After that, balancer protocol tokens are deposited into the yGov for YFI.

The last method involves making a deposit of yCurve and YFI mixture into the balancer, exchanging them for BPT tokens that will be deposited into the accurate YFI tokens and yGov. YFI was designed in a manner that all the three pools would be having at least ten thousand YFI tokens for grabs. 

yEarn.finance Governance

YFI tokens are used for governance in the yEarn ecosystem. One YFI token equals a single vote.

yEarn.finance ecosystem proposals only works when 33% of token holders reach the same agreement. If they meet this condition, then we can conclude that over 25% of the token holders are against the proposal. However, if approved, over 50% of the YFI holders have to vote in support of the proposal to be implemented. 

However, only the YFI holders to vote are the ones with BPT tokens in the yGov pool. It is the reason why Cronje calls this system of governance meta governance. The process involves holding YFI tokens and exposing yourself to high vulnerability and risk by having all the assets held by close to six DeFi protocols that come together with the yield.finance.

yEarn.finance – The Roadmap

Since the yEarn .finance’s protocol has been in existence for a couple of months while that the governance has currently (when writing this) existed a month. There isn’t much we can talk about concerning the roadmap. During our interview with Andre Cronje, he did reveal that DeFi protocol development like yEarn.finance is a type of a manic episode having almost all the protocol groundwork being created within a couple of weeks.

Andre made the YFI token for the purpose of ushering in a whole new community governance era that isn’t principle-based. Since Cronje and other key developers were never interested in managing the ecosystem, the YIPs are not the driving force for the ecosystem development since the introduction of community governance.

Most recently, the YIP attempt to increase YFI token supply cap didn’t attain a 33% vote, which led to YFI token forking into the other token known as YFI. The YFI token is not responsible for any role in yEarn.finance governance, but it is one thing that the entire community would vote on to change soon.

Conclusion

Since the yEarn.finance future is a bit fuzzy. It offers what is considered to be the first real experiment in decentralized finance that the world has ever encountered. With the possibility that the DeFi protocols we encounter today might not be available tomorrow, yEarn.finance, as an ecosystem of lending pools, will always be marked as a watershed moment in the DeFi space for many and lots of great reasons. DeFi proponents hope that yEarn.finance will be around for many years.

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Crypto Daily Topic Crypto Education

The Bitcoin Halving Aftermath – Trends and Implications

The third Bitcoin halving event, which happened on May 11, brought mining rewards from 12.5 BTC down to 6.25 BTC per block. This halving raised many questions, mostly on the topic of how the price will react to the halving and if Bitcoin has already “priced in” the halving.

The third Bitcoin halving event, which happened on May 11, brought mining rewards from 12.5 BTC down to 6.25 BTC per block. This halving raised many questions, mostly on the topic of how the price will react to the halving and if Bitcoin has already “priced in” the halving.

The third Bitcoin halving event, which happened on May 11, brought mining rewards from 12.5 BTC down to 6.25 BTC per block. This halving raised many questions, mostly on the topic of how the price will react to the halving and if Bitcoin has already “priced in” the halving.

Many analysts have made their predictions, ranging from Peter Shiff’s bearish prediction of Bitcoin going to 0 due to it having no underlying value and utility, all the way to some analysts who called for $1,000,000 Bitcoin. However, the market should pay attention to the short-term price implications and trends, as well as tools that can measure them.

What does the public say?

We can have a general representation of what the public thinks about when it comes to the Bitcoin halving by looking at Google Trends.

While a brief check of the term “bitcoin halving” will show an enormous increase in interest, we don’t know where that interest is coming from (in a non-geographical sense). We have to dive deeper and see if the ones interested in the halving are existing investors or rather new ones.

If we take a look at the number of searches for the terms “buy bitcoin” and “sell bitcoin” we can see that there hasn’t been much of an increase from before the halving, though some difference exists (“buy bitcoin” and “sell bitcoin” charts look almost exactly the same, so there is no need to show both).

We can also spot one more difference between the two pictures above, and that is countries with the most interest in these terms. While the term “bitcoin halving” sees most interest from highly-developer countries such as Switzerland, Netherlands, and Austria, “buy bitcoin” and “sell bitcoin” terms see the greatest interests from less developed countries or countries that have inflation problems.

We can also see that the Fear and Greed Index does not show any signs of a mega-optimistic market that could spark up an explosive price increase that happened after the first two halvings either.

What does all this mean?

This analysis brings us to the conclusion that, while there is an enormous interest in the bitcoin halving itself, it mostly comes from already existing cryptocurrency enthusiasts. Meanwhile, people that are interested in buying and selling Bitcoin are mostly coming from unstable regions and use Bitcoin as a “monetary escape” from their native currencies’ inflation rather than as an investment opportunity, which got that much better due to the halving.

This analysis does not claim that there is no new interest in Bitcoin, but that people should be conservative with their short-term predictions, as the crypto market will most likely not see such an explosive price increase as it has seen after the previous two halvings. However, the price is bound to increase over time due to the natural laws of supply and demand, though that price increase may be slow and gradual.

Today’s crypto market major flaw

While the Bitcoin market has its ups and downs, it prides itself on being revolutionary, as it strives to unite the world under one decentralized deflationary currency with a fixed supply. However, financial institutions such as the Chicago Mercantile Exchange have created the Bitcoin Futures market, which may prove to be detrimental to the future of cryptocurrencies.

While these financial institutions are well-known and bring more interest to Bitcoin, they trade Bitcoin futures that do not settle in Bitcoin, meaning that they trade thin air that is correlated to Bitcoin through their platform. This causes a major problem to the actual Bitcoin community as it essentially “prints” Bitcoin and creates a place for infinite supply as well as price manipulation.

When talking about the Bitcoin halving, its main purpose is to act as a deflationary force. However, with Bitcoin futures not having to care about the Bitcoin supply whatsoever, the deflationary effect of the Bitcoin halving gets drastically reduced.

How to approach Bitcoin investing?

The cryptocurrency market is a space where people invest their money because of two main reasons:

  1. Speculation (they want to leverage the volatility of the markets and make a profit and do not care about Bitcoin’s “mission”)
  2. Support (they truly believe in the technology and want to make a profit by “betting” on the future)

In both cases, the fundamental reason for investing in the market is profit. Miners mine for profit, traders trade for profit, everyone is here to make a bit of money. However, many people get stuck in a certain mindset (which is especially the case with Bitcoin bulls or bears) and stick to it no matter the market circumstances, which ultimately makes them lose money in the long run.

People should approach crypto trading and investing with caution and without emotion. They should assess the circumstances and use the tools at their disposal (as well as the market sentiment) to create the best prediction of where the market will move. They should also expect less and less explosiveness as time passes. However, the Bitcoin halving is certainly a solid indicator of where the price might move in the future, simply due to the natural “laws” of how self-sustaining markets work.

 

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Crypto Daily Topic

How to Build a Long-term Cryptocurrency Portfolio

Historical data shows that the crypto market has returned over 900% since 2017. Of course, the journey hasn’t been all smooth, as evident from the often unprecedented dip and high trends of the market. But in the long haul, its valuation has been increasing as more investors join the trade. 

Historical data shows that the crypto market has returned over 900% since 2017. Of course, the journey hasn’t been all smooth, as evident from the often unprecedented dip and high trends of the market. But in the long haul, its valuation has been increasing as more investors join the trade. 

Historical data shows that the crypto market has returned over 900% since 2017. Of course, the journey hasn’t been all smooth, as evident from the often unprecedented dip and high trends of the market. But in the long haul, its valuation has been increasing as more investors join the trade. 

With this in mind, the idea of targeting long-term gains is more appealing than chasing short-term profits, which are often not as much as the former. 

While investing in the long-term promises greater returns, it should be noted that the method requires patience and keeping your emotions under check in all market tides. To achieve this, you should only invest an amount that you can live without; so no matter what happens, you won’t have the urge to sell your cryptos to sustain yourself. Also, having a cushion to fall back on will prevent you from panic-selling. 

Why Should you Consider long-term Crypto Investment? 

Foregoing the short-term profits in favor of long-term gains is not only highly rewarding but also less risky. As such, you don’t have to worry about missing out on leveraging into a position or timing the market.  

Day trading/short-term investment is characterized by numerous transactions whose fees can quickly accumulate and eat into your profits. But when investing in the long-term, all you have to do is pick a few cryptocurrencies and then wait. This helps reduce the number of transactions, saving you the fees that come with active trading. 

Indicators of Long-term Value

Building a long-term portfolio boils down to the type of digital currencies you invest in. With over a thousand cryptocurrencies in the market, it can be overwhelming to choose one that pays off in the long run. Here are a few factors to consider when choosing cryptocurrencies for your long-term life portfolio: 

1) Market Cap

Generally, the market cap of a digital coin is its trading price multiplied by its circulating supply. Usually, cryptos with a higher market price are less volatile compared to those with a lower market cap. 

Large market cap coins like Bitcoin and Ethereum dominate the crypto market, which is an indication of their long-term viability. Even in bear markets, these coins tend to weather the storm and keep their value relatively higher. 

At the same time, it doesn’t mean that you shouldn’t invest in cryptos with a lower market capitalization. In fact, such coins may eventually outdo the dominant coins in terms of returns since they are still in the budding stage.

However, the lower-cap cryptos tend to be risky since not all of them grow exponentially as anticipated, with some even being fraud projects. As such, it makes sense to scrutinize the viability of lower-market cap coins before investing in one. 

Besides their potential to offer great returns, coins with a lower market cap are an ideal diversification tool. Rather than allocating all your funds to the dominant coins, you may consider allocating a certain percentage to the lower-market cap coins. But first, you need to assess your risk tolerance. In this case, if you are a conservative investor, allocate a higher percentage of your funds to coins with a higher market cap, and the vice versa is true. 

2) Utility Value

The true measure of a coin’s ability to survive for long in the market is whether it has a real-world user base or a concrete project backing it up. 

A coin’s utility value can be determined by its user base. For instance, Bitcoin has the largest number of users in the crypto market, thus holds more utility value compared to a less used digital coin. In the case of ETH, the coin derives its value from the Ethereum blockchain, which allows developers to build decentralized apps. Other cryptocurrencies with real-world use include Stellar, Ripple, and WanChain.

Other worthy considerations to help you determine a coin’s value include its governance and market opportunity. In this case, a coin’s governance means a solid framework regulating its supply, for instance, the mining process of the coin. Market opportunity, on the other hand, refers to a coin’s ability to provide a solution to the problem it intends to solve. 

3) Industry

The industry in which a coin is tied to not only predicts its long-term growth but also offers an opportunity to spread your risk. Apart from Bitcoin, most of the cryptocurrencies are designed to offer solutions to a particular industry. For instance, Vechain and Waltonchain intend to improve the supply chain industry. If, from your analysis, you believe that the two coins will steadily increase in value, you may consider investing additional capital in them. 

You can also spread your investment across other coins linked to the computing, networking, and financial industries to achieve a diversified portfolio. 

Don’t Be Too Rigid 

Now that you understand the essential steps in building a long-term portfolio don’t confine your earning potential to the structure of your portfolio. This means that you don’t have to completely stay away from short-term profits. When you spot a rising trend early enough, be sure to sell part of holdings to make a profit. 

It’s easy to be carried away by the quick profit to the point of disrupting your long-term portfolio. For this reason, you may consider adding a few low priced coins in your portfolio. These coins tend to offer better short-term gains, especially in a bullish market. Most importantly, adding them into your portfolio means that you won’t have to sell your long-term holdings in pursuit of the quick rewards. As such, you won’t compromise your long-term goal. 

Conclusion 

While the above tips will help you build a long-term portfolio, you should note that the crypto-market is highly volatile. To keep up with the trends, it demands that you regularly track and rebalance your portfolio in line with your objectives. Also, it’s a good idea to keep tabs on market events such as government laws in your jurisdiction regarding cryptocurrencies. These events usually have an impact on price movements. 

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Crypto Daily Topic

What Does the Introduction of Bitcoin ETFs mean to Crypto Investors? 

Over the last few years, key stakeholders in the cryptocurrency industry have been advocating for the approval of Bitcoin exchange-traded funds (ETFs). Unfortunately, the Security Exchange Commission (SEC) has rejected the ETFs on the basis of the market’s volatility. 

Over the last few years, key stakeholders in the cryptocurrency industry have been advocating for the approval of Bitcoin exchange-traded funds (ETFs). Unfortunately, the Security Exchange Commission (SEC) has rejected the ETFs on the basis of the market’s volatility. 

Over the last few years, key stakeholders in the cryptocurrency industry have been advocating for the approval of Bitcoin exchange-traded funds (ETFs). Unfortunately, the Security Exchange Commission (SEC) has rejected the ETFs on the basis of the market’s volatility. 

But what exactly are Bitcoin ETFs, and how are they different from actively trading the digital currency on crypto exchanges? 

To answer this question, we need to take a step back and examine how ETFs work in their most basic form. 

What is a Bitcoin ETF? 

Essentially, an exchange-traded fund (ETF) is an investment vehicle that tracks the performance of assets such as securities, bonds, and commodities like gold and oil. The fund can easily be traded on an exchange just like stocks, hence the name. ETFs allow investors to diversify their portfolio without actually owning the underlying assets. 

In the case of Bitcoin ETF, the backing asset will likely be bitcoin futures or actual bitcoins stored in wallets. For investors, holding shares in a bitcoin ETF would mean that you don’t have to worry about the complexity of actively trading Bitcoins in the market, or about safety. This is because the investors’ money is tied to the price of Bitcoin and not the digital currency itself. 

Advantages of Bitcoin ETFs 

Bitcoin ETFs come with some advantages which are crucial to the maturation of the entire cryptocurrency market. 

Big Money Interest

Bitcoin ETFs are a gateway to roping in mainstream investors into the cryptocurrency market. The main incentive here is that the ETF is regulated by brokers, and this increases investor confidence. That said, it will be easier for institutional investors to put their money into the fund in order to diversify their portfolios. Additionally, Bitcoin ETFs make it possible for the less than tech-savvy investors to invest in Bitcoin, thus helping them avoid risky token sales or blockchain-based projects. 

Increased Bitcoin Value

Usually, an ETF dealing with a commodity such as gold keeps a large amount of the commodity in reserve. Likewise, a Bitcoin ETF will be backed by large reserves of the digital coin stored in wallets. As the fund purchases more bitcoin to keep in reserve, the market value of the digital asset will increase.

More so, the fund will redirect the investor money into the Bitcoin global market. In turn, Bitcoin’s price will become more stable, making it more valuable. 

Added Legitimacy

Bitcoin itself isn’t completely illegal but still faces restrictions from various governments. However, if Bitcoin ETFs were to be approved on a major exchange under the regulation of a body such as the SEC, it would become more accepted by the general public. This would also prompt investment managers to include the fund in tax-sheltered retirement plans such as 401ks and mutual funds.  

Cons of Bitcoin ETFs

While there are advantages that come with the addition of Bitcoin ETFs in the market, there are a couple of valid reasons why the funds may be a bad idea. 

First, the funds might take away the decentralized nature of bitcoin holdings. This opinion is tied to the fact that investors don’t own the private keys of the underlying asset. The investors own shares in Bitcoin, which is not the same as owning the asset itself. As such, the fund custodians will have absolute authority on making crucial decisions such as which chain to support in the event of a fork, and even whether or not to issue forked coins to investors. 

Moreover, the entry of big money investors means that there is a high possibility of Bitcoin price manipulation through shorting. These investors may sway even the entire crypto-market to their advantage at the expense of other small-scale investors. It can get even worse considering that Bitcoin ETFs are open to any investors, including those that don’t understand or appreciate blockchain technology. The entry of such investors in the market may jeopardize the intrinsic value of the technology since they are largely more concerned with making profits than the growth and development of blockchain. 

Investing in Bitcoin ETFs

Clearly, the advantages of Bitcoin ETF outweighs its cons.  Although the fund is yet to be approved on U.S. exchanges, there are several functional Blockchain ETFs in European exchanges. Unlike Bitcoin ETFs, blockchain ETFs do not follow bitcoin prices but instead track the performance of companies linked to the blockchain space. Be aware, though, that the ETFs come with tax implications as per the provisions of the Financial Account Tax Compliance Act (FATCA).

Right now, the only Bitcoin financial product available to U.S. investors is  Bitcoin ETN. The two products are similar in that they relieve investors of the burden of owning the asset. However, ETNs are regarded as debt notes rather than a pool of assets. They are often issued by banks and are structured as bonds in the sense that they are unsecured. The only downside of ETNs is that if the underlying issuer goes bankrupt, investors are likely to lose their money. Perhaps this explains why Bitcoin ETNs haven’t gained much traction. 

Conclusion 

Bitcoin ETFs offer a new way of investing in the cryptocurrency market. As an investment vehicle, ETFs serve as a tool for driving Bitcoin adoption as global investors bet on the price of the underlying asset. But it is important to note that the real potential of ETFs is the sheer speculation from the crypto community. Unfortunately, the few ETFs that are in the market can’t be used to ascertain these speculations since they are exclusively offered to specific investors.

Even if ETFs live up to the hype, they still have a long way to go considering that Bitcoin futures still lag behind in terms of trading volume. For now, crypto investors can find consolation in the fact that European exchanges, as well as over-the-counter Bitcoin financial products, are paving the way for the inception of Bitcoin-based ETFs. 

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Crypto Daily Topic

A Cryptocurrency Indices Guide

Indices are a construct that’s been in the financial world for ages. Many people are already acquainted with stock indices that track the performance of the stock market as accurately as possible.

Indices are a construct that’s been in the financial world for ages. Many people are already acquainted with stock indices that track the performance of the stock market as accurately as possible.

Indices are a construct that’s been in the financial world for ages. Many people are already acquainted with stock indices that track the performance of the stock market as accurately as possible.

Essentially, an index is a function that indicates the price value of a security in that security’s market.

Cryptocurrency indices are not much different from stock indices – they keep track of movements in blockchain and crypto as well as gauge the general crypto market performance. With cryptocurrencies becoming such a rage, many investors are now gravitating towards them.

And thanks to crypto indices, professional investors can know where to put their money, and newbie traders can get a reliable exposure to the crypto asset class.

Let’s take a look at the most dominant cryptocurrency indices today.

CCi30

Launched in January 2017, the CCi30 is one of the oldest indexes. Unlike most crypto indexes, CCi30 only tracks the 30 largest cryptos by market capitalization. The team behind it is a combination of tech, mathematics, and economics gurus – including Igor Ravin (Professor of Mathematics at Temple University), Carlo Scevola (Economist and president of CS&P, a Swiss fiduciary company) and IT expert Robert Davis.

By focusing on the 30 largest cryptos, CCi30 assesses the overall growth and movement in the blockchain and crypto space. The index is being used by passive investors (investors who buy a security for holding in the long-term) to take part in crypto trading.

Bloomberg Galaxy Crypto Index

The Bloomberg Galaxy Crypto Index (BCGI) is another crypto index – but only geared at the largest cryptocurrencies traded in the US dollar. BCGI was launched in 2018 with a starting value of 1000. The BCGI index is owned by Bloomberg in a branding partnership with Galaxy Digital Capital Management.

According to the BCGI website, the index operates under four guiding principles:

  • Data integrity. Crypto pricing sources are selected based on their liquidity and reliability and after a rigorous risk and suitability assessment. As well, cryptos must meet the minimum threshold for daily traded USD value.
  • Diversification. No single crypto value can contribute more than 30% or below 1% of the market cap of the index.
  • Representative. The index’s goal is to provide a reference tool for the broader cryptocurrency market.
  • Continuity. The index seeks to be responsive to the ever-changing, dynamic nature of the market, while still preserving the character of the index over time.

The BCGI index selects cryptocurrencies on quite stringent criteria, including the following:

  • Trades in USD
  • A minimum of two pricing sources that meet Bloomberg’s pricing criteria
  • A minimum of 30-day median value traded at $2 million on those two pricing sources, or another eligible source
  • A free-floating value – one that is not pegged on any asset, even a digital asset
  • Be able to meet the above criteria for three consecutive months
  • Hard forks are evaluated on the same gamut of eligibility requirements as established cryptocurrencies
  • Twelve is the maximum number of cryptocurrencies that can be included, with the limitation being based on the highest performing – by market cap.
  • Any cryptocurrency to be included in the index needs to follow the above eligibility requirements for three consecutive months.

The Coinbase Index

Coinbase Index is an offshoot of the Coinbase crypto exchange giant. The index only tracks the performance of digital assets listed on the exchange. The index determines its overall value by weighing the value of crypto assets based on its market cap.

Coinbase index also keeps track of new cryptos introduced – or the supply of such cryptos.

The index was introduced in March 2018, with several improvements added since then.

The index has the advantage of easy access to price points – thanks to its Coinbase platform. Coinbase Index has given rise to the Coinbase Index fund, which gives passive investors exposure to all assets listed on the exchange. The fund is continuously rebalanced to include new assets that get listed on the exchange platform.

Huobi Index

The birth of Huobi Index was as a result of the need to simplify the trading process for investors on the Huobi exchange platform. The index, also known as the HB10 index, was launched in May 2018, with a starting value of 1000.

The index’s value is weighed with the Pasche weighted composite price index. The average daily volume of previous quarters is the main measurement that determines the samples that will be selected. Some of the current constituents at the index include Bitcoin, Ripple, Ether, EOS, Litecoin, Ethereum Classic, Ontology, IOST, and the native token for the Huobi platform.

The percentage of individual constituents moves in real-time, allowing investors to track it as such. HB10 uses Tether – as opposed to the US dollar, since the former, being a digital currency, better reflects the actual volume of transactions taking place.

Bitmain Big 10 Index 

Bitmain index (BLC 10) was launched by Bitmain – one of the largest companies in the world that produce crypto mining hardware. The index tracks the top ten largest and most liquid digital assets – denominated in USD, in the crypto market. These top ten cryptos are selected out of a total of 17 constituents whose data is aggregated from reputable crypto exchanges. These crypto exchanges must have high asset liquidity, be regulation-compliant, transparent, and stable.

Some of the exchanges the index uses are as follows: Bitfinex, Gemini, Huobi, Itbit, Bitstamp, Binance, Poloniex, Kraken, and Bittrex.

BLC 10 covers over 90% of the total market capitalization of the cryptocurrencies, with a diversified mix of decentralized as well as private coins. Investors can check real-time updates of price values – but they can also rely on the reference price that’s published daily at 10:00 am, Hong Kong time.

Conclusion

Indices are nothing new in finance. They help investors make more informed investment choices and to better study market sentiment. Also, investors can diversify and rebalance their portfolios as and when appropriate, to avoid incurring losses by putting all their eggs in the same basket.

With cryptocurrencies making such a splash, it only makes sense to have crypto indices that will make the investing experience much more worthwhile.