IRTG1792DP2021 014
Indices on Cryptocurrencies: an Evaluation
Konstantin Häusler
Hongyu Xia
Abstract:
Several cryptocurrency (CC) indices track the dynamics of the rising CC sector,
and soon ETFs will be issued on them. We conduct a qualitative and quantitative
evaluation of the currently existing CC indices. As the CC sector is not yet
consolidated, index issuers face the challenge of tracking the dynamics of a
fast-growing sector that is under continuous transformation. We propose several
criteria and various measures to compare the indices under review. Major
differences between the indices lie in their weighting schemes, their coverage
of CCs and the number of constituents, the level of transparency, and thus their
accuracy in mapping the dynamics of the CC sector. Our analysis reveals that
indices that adapt dynamically to this rising sector outperform their
competitors. Interestingly, increasing the number of constituents does not
automatically lead to a better fit of the CC sector. All codes are available on
Quantlet.com
Keywords:
Cryptocurrency, Index, Market Dynamics, Bitcoin
JEL Classification:
C00