We are proud to announce the launch of our latest cryptocurrency indices, featuring the new S&P Cryptocurrency Broad Digital Market (BDM) Index.
As we have discussed before, cryptocurrencies come with a host of new opportunities and challenges. As an emerging space, one of the biggest issues is a lack of transparency.
Our new S&P Cryptocurrency BDM Indices provide transparency with a wide snapshot of the cryptocurrency market and reflect a view of market performance overall. The S&P Cryptocurrency BDM Index includes more than 240 coins at launch, and we estimate that it covers over 80% of the current total cryptocurrency market capitalization.1
In terms of the indices themselves, the S&P Cryptocurrency BDM Indices are weighted by market capitalization. This corresponds to coin supply multiplied by coin price for cryptocurrencies. Because the market is especially dynamic, the use of fixed ratios or fixed values to determine market capitalization is quickly outdated. Instead, the indices use a clustering algorithm to select the appropriate cohort of constituents. For additional details on the market capitalization classification algorithm, please refer to the methodology.
To be included in the index universe, coins must be priced by Lukka Prime and trade on Lukka-recognized exchanges. Additional eligibility criteria include the following.
- Market Capitalization – Each constituent must have a market capitalization value greater than or equal to USD 10 million at the time of inclusion in the index.
- Liquidity – Each constituent must have a three-month median daily value traded (MDVT) of USD 100,000 at the time of inclusion in the index.
- Validating Research – Each constituent must have a supporting white paper.
- Stablecoins or any other pegged digital assets are excluded because while they are an essential part of the cryptocurrency ecosystem, they will not reflect growth (or contraction) in the market.
- Privacy-enhanced coins are excluded since they can hide the identity and profile of their holder.
- Coins that are or become subject to a regulatory or legal concern may be excluded.
While our initial cryptocurrency indices that launched in May 2021 focused on the two largest and most prominent cryptocurrencies—Bitcoin and Ethereum—this next series offers a broader view of the market. In the cases of certain indices, Bitcoin and Ethereum are excluded.
This launch includes the following indices:2
- S&P Cryptocurrency Broad Digital Market Index
- S&P Cryptocurrency BDM Ex-MegaCap Index
- S&P Cryptocurrency BDM Ex-LargeCap Index
- S&P Cryptocurrency LargeCap Index
- S&P Cryptocurrency LargeCap Ex-MegaCap Index
The exclusions serve to highlight the performance of relatively smaller coins that are overshadowed by the dominance of the two largest coins—which make up approximately 63% of total market capitalization.3 Exhibit 2 shows how the index’s average coin market capitalization diminishes dramatically as mega- and large-cap constituents are excluded—from almost USD 5 billion in the S&P Cryptocurrency BDM Index, to USD 1.1 billion in the S&P Cryptocurrency BDM Ex-MegaCap Index, to just USD 230 million in the S&P Cryptocurrency BDM Ex-LargeCap Index.
Stay tuned as we expand the cryptocurrency index series.
1 Source: S&P Dow Jones Indices LLC, USD 1.46 trillion, based on 950+ assets priced by Lukka Prime, as of June 30, 2021.
2 See FAQ for additional details.
3 Source: Lukka, USD 1.46 trillion, based on 950+ assets priced by Lukka Prime, as of June 30, 2021.The posts on this blog are opinions, not advice. Please read our Disclaimers.