Cryptocurrencies have made a big splash in the financial world over the past decade. In recent years, many investors have turned to crypto indexes as a way to track the performance of various cryptocurrencies. However, these indexes are now forced to undergo evolution as the crypto market continues to progress and mature.
Rise of Crypto Indexes
The rise of crypto indexes has been a response to the growing interest in cryptocurrencies among investors. Traditional financial markets have long used indexes to track the performance of specific sectors or asset classes, and these instruments have provided a similar service for the world of cryptocurrencies. These indexes track the prices of various cryptocurrencies and provide investors with a benchmark to compare their own portfolios against.
Evolving Crypto Market
However, as the crypto market continues to evolve, so must the indexes that track it. In recent years, the number of cryptocurrencies circulating worldwide has exploded to over 22,900 as of the first quarter of 2023, and the market has become much more complex. As a result, there is a growing need for more sophisticated indexes that can accurately track the performance of a wider range of cryptocurrencies.
New Indexes Emerging
To meet this need, new types of indexes are emerging that take into account factors such as market capitalization, liquidity, and volatility. These indexes provide a more nuanced view of the crypto market and can help investors make more informed decisions about where to invest their money.
Speaking of the crypto market cap, the estimated figure at the end of Q1 2023 is over $1.08 trillion. Bitcoin has the largest slice of the pie at over $470 billion.
Another factor driving the evolution of these tools is the emergence of new use cases for blockchain technology, especially in the field of finance. Blockchain technology has the potential to revolutionize the way financial transactions are conducted, and many experts believe that it will play a major role in the future of the sector. As a result, some new crypto indexes are now incorporating blockchain technology into their methodology, giving investors a more comprehensive view of the crypto market.
Increased Investor Sophistication
Finally, the growing sophistication of investors is also driving the evolution of crypto indexes. As more institutional investors enter the crypto market, there is a growing demand for more sophisticated investment tools. This includes indexes that are designed to meet the specific needs of institutional investors, such as those that track only the largest and most established cryptocurrencies.
Final Thoughts on the Need for Overhaul in Crypto Indexes
The rise of crypto indexes has been an important development in the world of cryptocurrencies. As the crypto market continues to evolve, so too must the indexes that track it. The emergence of new types of indexes that take into account factors such as market capitalization, liquidity, and volatility, as well as the incorporation of blockchain technology and increased investor sophistication, are all contributing to the evolution of these financial tools. These changes will help investors make more informed decisions about where to invest their money in the ever-changing world of cryptocurrencies.
Giancarlo is an economist by profession with a career spanning nearly two decades. His professional journey has seen him assume vital roles in various government and private organizations such as the Department of the Interior and Local Government (DILG), the National Economic and Development Authority (NEDA), Megaworld Corporation, and the China Banking Corporation in the Republic of the Philippines.
In addition to his civic and corporate pursuits, his forward-thinking approach has led him to manage several prominent websites in the banking and finance sector, notably the Australia-based RateChoice, where he immersed himself in the world of emerging financial technologies and where he found particular interest in Bitcoin all the way back to 2013.
Prior to his addition to Blockzeit’s dynamic team, he held an essential role as Project Manager for initiatives encompassing blockchain, stablecoin, mining, special economic zone development, and iGaming. This noteworthy chapter in his career unfolded under the auspices of InPlan Consultancy Services, Inc., the think-tank of IMPERO Consortium Management Corporation headquartered in Manila, Philippines, and Tokyo, Japan. InPlan, led by a distinguished retired Cabinet member of the Philippines, collaborates directly with IMPERO’s core management team, contributing to strategic planning and business development endeavors.