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Indices on cryptocurrencies: An evaluation

Author

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  • Häusler, Konstantin
  • Xia, Hongyu
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.

Suggested Citation

  • Häusler, Konstantin & Xia, Hongyu, 2021. "Indices on cryptocurrencies: An evaluation," IRTG 1792 Discussion Papers 2021-014, Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series".
    • Handle: RePEc:zbw:irtgdp:2021014
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    References listed on IDEAS

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    Cited by:

    1. Luis Lorenzo & Javier Arroyo, 2022. "Analysis of the cryptocurrency market using different prototype-based clustering techniques," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-46, December.
    2. Bilel Sanhaji & Julien Chevallier, 2023. "Tracking ‘Pure’ Systematic Risk with Realized Betas for Bitcoin and Ethereum," Econometrics, MDPI, vol. 11(3), pages 1-36, August.
    3. Dunbar, Kwamie & Owusu-Amoako, Johnson, 2023. "Role of hedging on crypto returns predictability: A new habit-based explanation," Finance Research Letters, Elsevier, vol. 55(PB).
    4. Wang, Yizhi, 2022. "Volatility spillovers across NFTs news attention and financial markets," International Review of Financial Analysis, Elsevier, vol. 83(C).
    5. Konstantin Hausler, 2022. "ETF construction on CRIX," Papers 2211.15260, arXiv.org, revised Mar 2023.

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    Keywords

    Cryptocurrency; Index; Market Dynamics; Bitcoin;
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