Thread by @QWQiao

A critical look at popular crypto indices.

First, why are indices important?

1. Passive funds track indices to provide investors broad exposure to a market.
2. Active fund managers benchmark their performance against indices (and by extension passive funds).

1) Bloomberg-Galaxy Index: Individual weights are capped at 30% and rebalanced monthly. The issue here is passive funds could incur considerable rebalancing cost. Imagine BTC quickly regaining >50% dominance within a month, the fund would have to sell a ton of BTC at month end.

2) @BitwiseInvest HOLD 10 Index: Forked coin will be held in the index until the next rebalancing. The issue here is that thinly traded shitforks like BTG should not be automatically added as they can inflate the index. Add a fork only if 30-day volume > X% of market cap.

3) @coinbase Index: Currently holds only 4 constituents: {BTC, ETH, LTC, BCH}. Not very representative of the overall market.

4) @fundstrat Index: There was a press release but couldn't find detailed methodology anywhere on the web.

One more thing, @coinbase, one of your formulas seems wrong. You should use P_x instead of VWAP_x. Using VWAP_x will cause a sudden spike (or crash) when a new asset is added to your index.

am.coinbase.com/documents/cbi-…