From Bitcoin to Multi-Coin: The Formula for Choosing a Winning Digital Asset Index for Investors
The S&P 500 is frequently viewed as a barometer for the overall health of the US stock market by analysts, journalists, and investors. With the recent market momentum, crypto indexes will soon be held in the same regard.
As more investors hold digital assets in a diversified portfolio, it’s in the interest of everyone in the industry to create the strongest possible crypto indexes: Doing so will capture not only the value of individual bull rallies, but the overall story of how digital assets are finding their way into the mainstream.
While some investors may indeed choose to invest, the impact of a successful index creates a far greater impact and pull effect than only financial investment.
A strong index will show that crypto has a large addressable market, inspiring more developers and entrepreneurs to found startups in the field. A strong index will portray the sector’s institutional adoption, encouraging competitors to also launch their own blockchain or crypto projects. A strong index will even drive consumer adoption by showing end users that digital assets and blockchain technology have compelling, real world uses.
To create a strong index, the institution should create one built to reflect market trends over the long-term, even if this may differ from the assets that the public is fixated on at the moment. The ideal index is the one that not only boasts of high numbers but ultimately attracts the most stakeholders into our industry. Here’s what investors need to know when choosing the best crypto index for their objectives.
Balancing the bipolar nature of crypto
When crypto first started, the sector was unipolar. If you looked at any key metric, such as market capitalization or trading volume, one digital asset would stand out from all the others: Bitcoin.
Later, when DeFi and NFTs grew in popularity, the ecosystem became bipolar, revolving largely around both Ethereum and Bitcoin. Despite this fact, some indexes still strongly favor either Bitcoin or Ethereum, often due to their makers’ philosophical beliefs and prejudices about cryptocurrency. Rather than represent the sector as we believe it …
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