Creating a profitable crypto portfolio and managing it properly is difficult and troublesome. You have to constantly monitor the market situation and properly diversify risks according to the current situation. Therefore, traders and investors turn to automated services – cryptocurrency index funds, which facilitate the work.
What is a Cryptocurrency Index Fund?
A crypto index fund is an automated service that offers a ready-made investment portfolio where several digital assets are represented at once. These assets are selected according to a number of criteria: market capitalization, price, volatility, liquidity, and so on. The service takes care of automated market monitoring and analysis, risk diversification, and other factors. Such a tool is equally suitable for both beginners and experienced players – and this versatility has a positive effect on the rapid growth of its popularity.
What Is a Cryptocurrency Price Index?
It can be said to be a website or platform with information about the price and capitalization of various cryptocurrencies, the overall market supply, for instance StormGain crypto index. Typically, these sites take information about the price of various coins at the moment. They are also a good source for tracking and benchmarking the behaviour of various cryptocurrency assets.
Depending on the listing criteria, price indices can provide data on all coins and tokens available in the market or selectively for a certain criterion – whether it is available on public exchanges with sufficient liquidity.
Nevertheless, the most reputable price indexes “list” most of the coins available on the market, and therefore represent a good way to monitor the entire cryptocurrency market at any given moment without having to manually collect data from hundreds of different cryptocurrency exchanges.
What’s the Difference From Traditional Stock Indices
The principle is essentially the same. Both reflect the financial health of the industry in which the investor has invested. The main difference is that traditional stock indices show information on company stock prices, while cryptocurrency indices provide information on the prices of cryptocurrency assets of various blockchain-based networks.
Another difference is that while cryptocurrency price indexes typically include most cryptocurrency tokens on the open market, traditional stock indexes include only a limited number of stocks that have something in common – usually a sector or company size. These indices are often viewed as a sampling to help investors gauge the health of the entire market.
The S&P 500 Index – the Standard & Poor’s 500 Index – includes the five hundred largest U.S. companies by market capitalization, while the FTSE 100 – the Financial Times Stock Exchange 100 – consists of the hundred largest companies by market capitalization that are listed on the London Stock Exchange.
On the other hand, the FTSE techMARK 100 features only one hundred of the London Stock Exchange’s leading innovative technology companies, while the S&P Global 1200 Information Technology Index includes only companies from the IT sector.
What Information Can a Cryptocurrency Price Index Provide?
Mostly price and trading information. You will usually see the current market price of the cryptocurrencies in question, their market capitalization – that is, the current price multiplied by the negotiable supply – and the total trading volume of the coin in the various markets over the past 24 hours.
You can also click on individual coins to get more detailed information. This can be the current and maximum supply of the cryptocurrency, the price chart for different time periods, and a list of all markets or exchanges where this coin can be traded.
While this is most often general information, different platforms provide different information depending on their user base. If, for example, the index is trader-oriented, it may display the maximum and minimum price of a coin over the past 24 hours. At the same time, another platform tailored to the needs of long-term investors may cover specific characteristics of the coin: the embedded model – PoW or PoS – focuses on remittances or asset tokenization, and so on.