How have indices changed the long-term prospects for digital assets?

Financial indices are used extensively both to track the world markets (e.g., the MSCI World Index for the world’s equity markets), and to form bases for various investment products. The digital assets space constitutes a nascent market which is fragmented, prone to security issues, and difficult to monitor. This makes indices crucial not only for establishing investment benchmarks, but also for monitoring the market.

In comparison to equity markets, the digital assets market presents a number of challenges for indexers. While an index can often use one liquid exchange to price a stock, because of the issues addressed above, an index for digital assets might need to use several exchanges to ensure the fair price of a digital asset. The events that can have an effect on the index will also need to be treated differently. The index methodologies for treating corporate actions in equity markets or e.g. coupons in bond markets were established long ago, but events such as forks (in the digital assets market) are quite new and require robust methods in order to be treated appropriately.

While there are, and will be, further challenges in the digital assets market for indexers, there is one ultimate requirement: Transparency. This includes the transparency of both index methodology and composition, not least because history and statistics are essential in satisfying financial industry standards.

MVIS CryptoCompare Digital Assets 10 Index versus
MVIS CryptoCompare Digital Assets 100 Index versus
MVIS CryptoCompare Bitcoin Index

Source: MV Index Solutions. Data as of 25 September 2018.

About the Author:

Emre Camlilar serves as the Head of Index Operations for MVIS indices globally. He is an index expert with 5 years of experience in index development, management and maintenance. With his extensive index expertise, Emre offers deep knowledge of MVIS operations, new index construction, products and administration. He holds an M.Sc. in Economics from the University of Freiburg, Germany.


The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.