Crypto’s S&P 500: CoinDesk Unveils Broad-Market, Digital-Asset Index
CoinDesk on Friday unveiled a new index of digital-asset prices, saying it hopes the broad gauge of crypto markets could become an industry benchmark similar to the stock market’s Dow Jones Industrial Average or Standard & Poor’s 500.
The CoinDesk Market Index initially consists of 148 digital tokens, said Jodie Gunzberg, managing director for CoinDesk Indices. To be included, each token must have a pricing history from at least two eligible exchanges going back at least 30 days.
“It’s meant to be as inclusive as possible,” Gunzberg said in an interview. “We’re just trying to represent the market.”
The new index joins a growing field of competitors aiming to meet demand from investors and traders for ways to measure the crypto market’s performance. Other providers include Bloomberg Galaxy, CF Benchmarks (part of the Kraken exchange), Nasdaq, Solactive, MarketVector, MSCI and S&P.
Traders and money managers use price indices to evaluate whether they’re beating – or getting beaten by – the market. Asset-management companies build investment funds based on indices; big firms like State Street and BlackRock have built huge businesses selling exchange-traded stock funds based on the S&P 500, Nasdaq Composite and other indices, including for bond and commodity prices.
Customers “would be anybody who’s looking for benchmarking,” Gunzberg said. “That could be people who are looking at measuring performance, generating investment ideas, looking for ways to manage risk, peer group evaluations.”
CoinDesk Bitcoin Price Index
CoinDesk’s new index builds on the early success of its Bitcoin Price Index, which the media company added via its 2021 acquisition of TradeBlock, a data and trading platform. (TradeBlock’s operations outside its index business were spun out of CoinDesk earlier this year, Gunzberg said.)
The CoinDesk Bitcoin Price Index – often referred to by its ticker XBX – is the basis for price charts on the CoinDesk website, and it underpins the price-setting mechanisms for at least two big investment funds, the $12.1 billion Grayscale Bitcoin Trust (GBTC) and the roughly $500 million Purpose Bitcoin ETF.
CoinDesk management hopes that licensing fees from the growing index business could become a key source of revenue alongside advertising, sponsorship sales and crypto conferences, especially the flagship Consensus franchise. (CoinDesk is an independent subsidiary of Digital Currency Group, the crypto-focused conglomerate that also owns Grayscale and TradeBlock.)
Gunzberg, who joined CoinDesk in 2021 from the Wall Street firm Morgan Stanley, said that a key differentiator for the CoinDesk Market Index, or CMI, is that it’s the first in a “family” of nine indexes built around the company’s proprietary classification system for cryptocurrencies, known as the CoinDesk Digital Asset Classification Standard, or DACS.
The DACS divides about 500 of the biggest digital assets into six categories: Currency, smart-contract platform, DeFi, culture & entertainment, computing and digitization.
So the broad CoinDesk Market Index will come with six sub-indices, corresponding to each of the DACS categories. Two more sub-indexes will strip out stablecoins “so you can get the full effect of the volatility” of cryptocurrencies that aren’t pegged to government-issued currencies, Gunzberg said. Prior to her stint at Morgan Stanley, Gunzberg was a managing director at S&P Dow Jones Indices.
“What really makes this launch unique is the family of indices, representing not just the broad market but the sectors,” she said. “The first question might be, Is the market up or down today? You might look at the broad market index for the answer. But then you ask, ‘Why, what drove it?’”
The CMI index will be weighted by market capitalization, which means that, at least initially, it’s heavily skewed toward bitcoin (BTC) and ether (ETH), the two biggest cryptocurrencies.
The index will be rebalanced monthly on the second business day of the month, and the number of assets is expected to expand beyond the initial 148, Gunzberg said. The pricing history for the index dates back to Aug. 29, an admittedly short timeframe that will also increase “as time passes,” she said.
“That 148 is not a fixed number,” Gunzberg said. “That number is a result of the methodology. I would expect that to grow as the market grows.”