Bloomberg, the worldwide leader in market data providers and index services, has introduced the Bloomberg Galaxy Crypto Index (BGCI), which is “intended to follow the performance of the biggest, most liquid component of the cryptocurrency market.”
Market-Cap Weighted: The First Major CryptoIndex
The BGCI is a market capitalization-weighted index, which means that cryptocurrencies with greater market capitalizations will have a higher weight in the index. BGCI will be made up of up to 12 cryptocurrencies that will be exchanged in US dollars. It started with ten cryptocurrencies, including bitcoin, ethereum, monero, ripple, and ZCash. The index components span many aspects of cryptocurrencies, such as monetary value storage and exchange (for example, bitcoin), smart contract protocols (ethereum), and privacy-focused digital assets (monero).(For more information, see The Five Most Private Cryptocurrencies.)
It will be rebalanced and reconstructed on a monthly basis, with each component weight falling between a maximum of 30% and a minimum of 1%. If any cryptocurrency experiences a hard fork, resulting in the birth of a new cryptocurrency, the above-mentioned rules will apply to both the parent and child (forked-out) coin for each new qualifying entry in the index.
As of the commencement date of May 3, 2018, the index has a base value of 1,000. The index had the following ten components at the time of its launch:
The Bloomberg Galaxy Crypto Index, like various other market indices such as the Dow and S&P 500, will provide a single number indicative of the performance of the world’s leading virtual currencies. (See also: What Is the Dow and How Is It Calculated.)
The index will be added to the Bloomberg Index Services Limited family of indexes. Co-branding will be aided by Galaxy Digital Capital Management.
While other bitcoin market indexes exist, the Bloomberg launch signals the debut of a significant player, making it “the first institutional grade benchmark for the cryptocurrency market.” Other lesser-known indexes include the Crypto Currency Index 30 (CCi30), which measures the top 30 cryptocurrencies by market capitalization and is rebalanced weekly, and the CRypto IndeX (CRIX), which comprises 20 components based on statistical methods.
“The index takes our rigorous methodology to index development to cryptos and will give investors with a transparent benchmark to assess the performance of the larger market,” Alan Campbell, global product manager for Bloomberg Indices, said in response to the rising interest in cryptocurrencies.
“The Bloomberg Galaxy Crypto Index delivers unparalleled transparency to the crypto markets,” said Michael Novogratz, CEO and creator of Galaxy Digital Capital Management. We are thrilled to be able to contribute to the decentralized revolution by establishing BGCI.”
Investing in cryptocurrencies and Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and neither Investopedia nor the author suggest that you do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author owns no cryptocurrencies as of the day this post was published.
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