Cryptocurrency Index Trading
The Crypto Market Index 10 is an index for the Top 10 cryptocoins or tokens in terms of market capitalisation. Since this index tracks the top blockchain projects, the Crypto Market Index 10 is widely considered the benchmark index for the cryptocurrency market. By simply tracking this index, investors can quickly get a feel of the volatility and sentiment of the overall cryptocurrency market. The Crypto Market Index 10 was introduced on the 31st of December 2016 by Crypto Finance AG, with the objective to reliably track the performance of the largest and most liquid cryptocoins and tokens as well as to provide an investable benchmark for the cryptocurrency market.
It launched with a standardized baseline value of 1000 points and its value has since mirrored the performance of the overall cryptocurrency market. The index posted an all-time high of circa 13,600 points in January 2018, before drifting lower that year to a low of circa 2200 in December 2018. It largely moved higher in 2019, posting a high of circa 7800 in July 2019.
Index Composition and Calculation
The Crypto Market Index 10 is measured in points and tracks the prices of the top ten cryptocoins and tokens in the market. Market capitalisation (which is, the token price times number of units in circulation), as well as trading volumes, determine inclusion into the index. In order to be included in the index, the following conditions must be met:
- A coin or token must have an average market capitalisation of $1 billion over the last 30 days being considered.
- A coin or token must have registered a daily trading turnover of over $5 million over the last 30 days.
In a scenario where less than 10 coins and tokens meet the above criteria, only the qualified assets will be used to compute the Cryptocurrency Index. Below is a table of the coins and token included in the Crypto Market Index 10 as of August 2019:
|1||Bitcoin (BTC)||$203 billion|
|2||Ethereum (ETH)||$32 billion|
|3||Ripple (XRP)||$16 billion|
|4||Litecoin (LTC)||$7 billion|
|5||Bitcoin Cash (BCH)||$7 billion|
|6||EOS (EOS)||$5 billion|
|7||Binance Coin (BNB)||$4 billion|
|8||Tether (USDT)||$3 billion|
|9||Bitcoin SV (BSV)||$3 billion|
|10||Tron (TRX) $2.3bn||$2.3 billion|
The index computation formula is contained in a Crypto Finance AG white paper. It follows the logical-mathematical principles below:
- Crypto Average Rates – These are the prices of the index components based on the average price feeds of selected crypto exchanges.
- The weight of each asset depends on its price and the number of units it has in circulation.
- There is a variable Divisor that changes depending on the units of an asset in circulation at a given time as well as the asset rank.
- The index is calculated each trading day from 0600hrs to 2155hrs GMT+2 and disseminated to major data vendors in real-time.
The cryptocurrency market is very dynamic and, to reflect any changes that may occur, the Crypto Market Index 10 rebalances quarterly to delete or add eligible assets. The cut-off date for the index review is on the last trading days of February, May, August and November. In addition, the implementation dates of any resulting changes come into effect on the third Friday of March, June, September and December.
History of the Cryptocurrency Market
In 2009, there was only one cryptocurrency, Bitcoin, which has stood the test of time and remains the primary gold standard for the overall industry. There are now over 2000 altcoins, but only a dozen have proven to be sustainable projects worth serious investor money. Decentralisation propped up the idea that cryptocurrencies represent the future of money. This subsequently led to hype and interest beyond the investing public. Adoption and popularity of cryptocurrencies hit a high in 2017 with Bitcoin, the leading cryptocoin, hitting an all-time high of circa $20,000 in December of that year.
But the market always faced regulatory risk, and 2018 was the year serious efforts were made by various government agencies to clip the wings of assets that seemingly had no wings. On January 2018, major tokens lost more than 40% of their values and were suppressed throughout the year. Yet, regulation was not a curse to the industry entirely. Firstly, when the market was in its infancy, the headlines were of a blanket ban. So, the shift to regulation meant there was an appreciation of the disruptive potential of the industry and the need to deal with possible negative effects.
Secondly, regulation headlines have also helped generate interest in the cryptocurrency space, attracting more participants and fuelling adoption. Most regulators now consider crypto assets as legitimate financial assets. Crypto ETFs (exchange-traded funds) have already been launched in major exchanges around the world.
Also, in the US, a previous crypto critic, Bitcoin futures are already trading at the Chicago Board Options Exchange (CBOE). The CBOE has also consistently lobbied the US Securities and Exchange Commission (SEC) to soften its stance on crypto assets. As of August 2019, there are proposals to launch tradable crypto ETFs, with the SEC expected to make a decision before the end of 2019. Cryptocurrencies have come a long way, and recent headlines will continue to excite investors focused on this space.
Factors Influencing the Overall Price of the Crypto Market Index 10
Due to the composition of the Crypto Market Index 10 and the general nature of the crypto market, various factors may impact its price level. The crypto market is headline sensitive and will particularly react to big news from regulatory agencies, such as the US’s SEC and China’s CSRC, as well as other relevant headlines, such as hacks on major crypto exchanges.
Other news that may impact the index’s price are mining and trading legislation in different countries. The index will also be heavily impacted by significant price shifts of one of its constituent components, especially Bitcoin. As stated above, Bitcoin acts as the gold standard of the cryptocurrency market, and it usually provides the cue for price direction for other coins and tokens.
Why Trade the Crypto Market Index 10?
There are many benefits to trading cryptocurrencies and the Crypto Market Index 10:
- Liquidity – The index is highly liquid due to the amount of activity generated by the individual constituent assets.
- Lower volatility – The main risk of the crypto market is higher than normal volatility. With a crypto index, the volatility is lower, making it more predictable than individual assets.
- Diversification – The Crypto Market Index 10 offers investors a great way to diversify their crypto portfolio without increasing their risk exposure.
- Vast news coverage – By tracking the top 10 crypto assets in the world, the index receives wide coverage and interest among the global investing public.
Why Trade the Crypto Market Index 10 with AvaTrade?
Trade the Crypto Market Index 10 or any other individual cryptocurrency CFDs at AvaTrade and enjoy the following benefits:
- Regulation – AvaTrade is a regulated and award-winning broker, and we are in the process of expanding our regulation even further.
- Intuitive Trading Platforms – We offer access to a choice of intuitive trading platforms and effective solutions to maximize trading accuracy. These include the highly popular (MetaTrader) MT4 and MT5 trading platforms, the AvaTradeGO app, the DupliTrade social trading system and AvaOptions, AvaTrade’s exclusive Vanilla Options trading app.
- Choice of Assets – AvaTrade offers first-class access to a wide range of tradeable assets including cryptocurrencies, forex pairs, commodities, stocks, indices, bonds and EFTs. Our clients can also use automated trading with API Trading, ZuluTrade and DupliTrade. AvaTrade is also one of the few companies to offer Vanilla Options.
- Leverage – Enjoy leverage of up to on crypto assets.
- No Wallet Required for Cryptos – With AvaTrade, you do not need a wallet to trade cryptos as you’re trading CFD on the underlying asset which is crypto. Trade your favourite assets from the comfort of one of our trading platforms.
- Safety First – AvaTrade is globally regulated via 8 authorities across 5 continents, so your safety is not just assured; it is guaranteed. Our clients’ funds are held in a segregated account, plus with the help of negative balance protection, we protect our clients and ensure a trader’s account will never go below zero.
- Variety of Payment Solutions – At AvaTrade, we offer a choice of secure deposit methods including credit cards, wire transfer, WebMoney, Dinpay, Boleto and FasaPay. AvaTrade does not charge any commissions, and there is no margin interest.
- Comprehensive Educational Resources: You can access our vast collection of informative, trading educational materials including articles and videos, and articles. Our clients can also access our eBooks and weekly webinars.
- Professional & Responsive Support: AvaTrade provides multilingual customer service and support for every question you might have.
- Cryptocurrencies are an exciting way to enter the financial markets, and they offer a range of trading opportunities.
Crypto 10 Index Trading Main FAQs
- What is the Crypto 10 Index?
The Crypto 10 Index is a market capitalization weighted index of the top 10 cryptocurrencies. Because it is composed of the top ten cryptocurrencies it is widely accepted as a benchmark for the strength or weakness of the broader cryptocurrency market. It was created by Crypto Finance AG and launched on December 31, 2016 with a value of 1,000. As of June 2020 it is managed and calculated by BITA GmbH and has a value around 2,650. Because cryptocurrencies often move up or down in tandem it isn’t unusual for this index to make very strong moves in either direction.
- Should I trade the Crypto 10 Index?
Because it is tracking the ten largest cryptocurrencies the Crypto 10 index is an excellent choice for those who want to trade the cryptocurrency markets, but want to try and avoid some of the volatility that comes with trading individual cryptocurrencies. The combination of 10 different assets smoothes out moves in the index somewhat, although it can still be quite volatile in comparison with traditional assets and markets. Traders also appreciate the liquidity found in this index and the diversification it provides.
- What is the best strategy for trading the Crypto 10 Index?
There are many different strategies that can be used to trade the Crypto 10, but sometimes the simple strategies are also the best. That’s the case with the Crypto 10. A simple strategy that works well for day trading on the 2-hour charts using a 10-period moving average is as follows: wait for price to rise and either touch or move above the 10-period moving average. The candle should also be a red candle, that is the closing price is lower than the opening price. When these two conditions are met place a limit order 2 points above the highest point of the red candle, with a stop at the bottom of the red candle.
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