Our goal is to provide an index that gives people a birds’ eye view of the cryptocurrency market, similar to what the S&P 500 does for stocks. Our index is well designed and will continually adjust to the market as it grows.
Here are the key features:
The right assets
The index contains only currencies, app tokens, and commodity tokens - no equities or specifics. The currency market is much more mature than the other markets, and the tax and legal treatment of other assets is different. Our index provides full exposure to the large-cap coins and the mid-cap coins, just ending at the border between mid-cap and new coins.
There are offsetting characteristics in this market - when bitcoin goes up, it often sucks cash out of smaller coins, and when bitcoin goes down, smaller coins benefit. Because very few coins occupy between 5-10 percent of the portfolio, and the median coin has roughly 1.5 percent, we expect the index to move slowly over time and have no vertical moves.
The right number
When it launches, the index will have about 50 currencies, and the median currency occupies about 1.5 percent of the portfolio. As the industry grows, we will increase the number of currencies in the portfolio. We watch for churn at the bottom end and whether enough currencies meet our criteria. We will always use a number cut-off, but the number will grow as the asset class grows.
We believe most of these currencies will rise in price over the coming years. As they rise, the value of our index and the price of our index token will rise as well. We are hoping for somewhere in the range of 20 - 25 percent growth, and a Sharpe ratio between 1.5 and 3. Time will tell if we can achieve this.
While currencies enter our index at around 1 percent, they have a chance to rise to as much as twelve percent. This gives up-and-coming currencies a chance to outperform others and contribute to our portfolio. Fast-growing currencies are capped at 10 percent until they hit $1 billion in market cap, then they go down to 6 percent. This reduces volatility and makes room for future up-and-coming coins.
We use an algorithm to screen currencies. We don’t use human judgment. This is in line with the smart-beta approach to portfolio construction. We only use human judgment in three cases: a) to set the total number of coins in our portfolio, b) to remove the odd coin that meets our criteria but we feel is suspect for some reason, and c) to deal with hard forks, where a blockchain and its currency split into two. The second exception will be rare. An example are the Trump and Putin coins that traded heavily for a few weeks in January, 2017, but don’t belong in the index. Otherwise, the algorithm decides everything.
How to use the CryptX index.
The CryptX index is a proprietary index, like the S&P or Wilshire indexes. Token Factory owns the trademarks to these names, and Token Factory is the originator of the CryptX index token. We want you to use our index to describe the market. We don’t charge a royalty fee. We will have a data feed you can use to get the daily NAV figure. Please use the term “CryptX index,” or “CryptX index by Token Factory” in your documents.
Have any questions? Contact us: email@example.com
We are building
the CryptX token system
the CryptX token system
We plan a special offering when we launch our token, and we have much more coming. We want people to learn how to apply good portfolio design to blockchain-based tokens. Sign up for our mailing list. We’ll notify you of our progress, products, and thoughts on cryptoinvesting.