Coinoindex – Dow-Jones Index for Cryptocurrencies
Cryptocurrencies are very new but even in several years of existence thousands of coins have been created, some of them are already gone but some are quite stable and can be called crypto “blue-chips”. There are about 20-30 coins with a market capitalization of above 1 mil USD and significant daily trading volume. But of course Bitcoin trumps all the other cryptocurrencies in market capitalization and trading volume (currently all altcoins market cap is about 15% of the Bitcoin market capitalization).
So an idea to compare top cryptocurrencies to Bitcoin emerges quite naturally, let’s take top 20 altcoins, make a portfolio out of them, and see how the portfolio value fares in comparison to BTC.
Building such a portfolio, we create an analogue of Dow-Jones index for cryptocurrencies. Dow-Jones index has been launched more than 100 years ago, and is composed of top 30 US stocks (picture here). Coinoindex.com has been launched in summer 2015 and already had its ups and downs too, reaching 1300 value is summer and dropping to around 800 currently (real time value can be tracked at Coinoindex.com).
Initial Coinoindex value was 1000, so it can be seen that investing in major altcoins one could have made 30% profit several months ago or suffer 20% loss by now. Strong trends can be observed in the chart, summer rise (probably due to many Chinese investors moving to alts from Chinese stock market), and current bear market.
On the other hand it’s clear that the Index is much less volatile than the coins it is composed of, take a look at BTC or ETH or LTC for example. This is the main reason why the market Indexes investment exists, dozens of mutual funds invest in the portfolios based on major market indexes such as S&P or Dow-Jones. The reasoning behind this is making secure profits when the market is on the rise, without the risks of picking a wrong stock to invest in.
So another natural idea emerges – let’s trade the altcoin index :). This idea is already realized, the Index can be traded at Poloniex.com: https://poloniex.com/exchange (against Bitcoin) and at NXT asset exchange (against NXT). Basically traders are able to trade the current altcoins market trend, not a specific coin. Investing in 20 top coins at the same time might be less lucrative than investing in a coin which is about to skyrocket, but is much more secure.
Current portfolio composition, selection rules, index value and exchange prices are posted at http://coinoindex.com. Next bull market might be not so far ahead, so it might be a good opportunity to start trading the top 20 portfolio now.