Superapp CryptoWire just created IC15, India’s first cryptocurrency index, which measures the effectiveness of the 15 most commonly sold cryptocurrencies listed on major crypto exchanges in terms of market capitalization. The Mint explains how it works and what it means.
What is the structure of IC15?
CryptoWire established an Index Committee made up of industry experts, business practitioners, and academics who can choose cryptocurrencies among the top 400 in terms of market value. The qualified coin must have traded at least 90% of the time throughout the evaluation period and be one of the top 100 highly volatile cryptocurrencies in terms of buying and selling value. In addition, when it comes to circulating market value, the crypto must be among the top 50. The topmost 15 cryptocurrencies will be chosen by the committee. The index will most likely be updated every three months.
What exactly does it mean?
According to CryptoWire, IC15 will be used to create index-linked products like index funds and exchange-traded funds (ETFs). Frequently, a mutual fund scheme’s efficiency is measured against a benchmark, such as the Nifty or even the Sensex’s total return index. In India, the IC15 index is the key index that may be used as a benchmark for the fundamental cryptocurrency market as well as a benchmark for fund managers’ efficiency. This index can also be used by Robo-advisors, which provide financial advice with little or no human participation.
What is the relationship between IC15 and various market indicators?
The IC15 index has a base value of 10,000 on April 1, 2018, which implies it has increased by 615 per cent in absolute terms to 71,475.48 by December 31, 2021. In 2021, the IC15 has returned 138 per cent, compared to a 24 per cent return for the Nifty 50, a -3 per cent return for gold, and a 27 per cent return for the S&P 500. Favourable elements in IC15 would not reflect positive aspects in various asset lessons since the index has a limited association with them.
Is it possible to reduce risks by investing in cryptocurrency indexes?
Like a fund trades in a portfolio of assets for a little amount of money, index investing is an effective way to diversify against risks. However, index-based investment cannot completely eliminate the risks associated with investing in crypto assets. Working example: In 2018, IC15 had a 50% reduction, while other asset classes saw a maximum drop of 3-4 per cent. Furthermore, the index has a combined weightage of 77 per cent for bitcoin and ethereum, making it particularly vulnerable to any fluctuation in these two currencies.
Is it possible to start crypto funds in India?
Chairman of the Securities and Alternate Board of India, Ajay Tyagi, has asked that mutual fund houses refrain from launching crypto-based products until the government issues clear guidelines. As a result, asset management firms will not be able to develop crypto funds based on IC15 for the time being. However, in the dearth of any regulations, crypto platforms can offer products based on the index. Mudrex, a global crypto investment platform, debuted Coin Units last year, which are crypto funds focused on themes like decentralised finance or market cap.