The crypto industry can already be considered a legitimate sector of the economy, and like any respectable industry, it could benefit from its own specialized index that reflects its condition, similar to how the S&P500 index does for the traditional economy. Besides the emergence of various secondary financial instruments like funds, indices serve the purpose of quickly understanding the current situation in the stock market or, in our case, the crypto market. As there is no universally accepted index for cryptocurrencies yet, a competitive battle has unfolded for this right, in which the well-known news outlet Coindesk has decided to participate by releasing its crypto index named Coindesk 20 index in January 2024.
As the name suggests, Coindesk's index includes 20 different cryptocurrencies: Bitcoin, Ethereum, Solana, XRP, Cardano, Avalanche, Dogecoin, Polkadot, Chainlink, Polygon, Internet computer, Shiba Inu, Uniswap, Litecoin, Bitcoin Cash, Cosmos, Stellar, Aptos, and Filecoin. The weight of each cryptocurrency in this index is not equal; for example, Bitcoin holds 31%, Ethereum 23%, Solana 11%, and the last ten cryptocurrencies each have a weight of only 1% in the index.
Comparing this with the top cryptocurrencies by market capitalization, it closely aligns, with exceptions like stablecoins, Binance Coin, Tron Coin, Ton coin, OKB coin, and Monero. The creators of this index seem to be trying to avoid cryptocurrencies affiliated with major companies and anonymous cryptocurrencies. The reason for this specific choice remains speculative, but it could be an attempt to create an index that is as neutral as possible and suitable for U.S. regulatory standards.
In contrast to Binance CMC TOP 10, where the index includes the cryptocurrency of the Binance exchange, Binance coin (BNB), Coindesk 20 index aims to be more inclusive. For comparison, Binance CMC TOP 10 started in October 2022 with a value of 1000, and by the beginning of 2024, its value is 1620, indicating an average increase of 62% over the last year.
Coindesk 20 index started on January 1, 2024, with a value of 1800, and as of January 22, its value is 1650, showing an average decrease in cryptocurrency value of approximately 10%.
In other words, using the crypto index, investors can monitor the overall state of the crypto market without spending much time on it. This is convenient for investors who are not willing to dedicate a lot of time to analyzing the crypto industry but are considering the possibility of buying crypto assets during downturns or, conversely, selling them in a bullish market.
In addition to the Coindesk20 Index, on the Coindesk website, you can find numerous other crypto indices categorized by sectors: stablecoins, DeFi, crypto games, smart contracts, computations, and metaverses.
