The high volatility of the cryptocurrency market is partly due to the small market caps of many assets and the 24/7 operation hours of decentralized exchanges (DEXs) and centralized exchanges (DEXs).
Crypto trading is not only high-risk but also takes a lot of time. Most investors find it difficult and intimidating to choose which tokens to invest.
Index investing is a lucrative option for these investors to gain exposure to the most volatile sectors of the cryptocurrency marketplace.
Let’s take a look at the crypto index products compared to individual tokens, and see which strategies have generated the highest return.
Index Cooperative (INDEX), a decentralized autonomous asset management system, allows investors to create their own custom index of tokens through smart contracts.
Index Coop is home to many of the most traded indexes, including the DeFi Pulse Index(DPI), Metaverse Index(MVI), Data Economy Index [DATA], and Bankless DeFi Innovation Index (“GMI”).
The price of these indexes can be plotted against the total market capitalization to get a better idea of how they performed in comparison to the overall market.
DPI/USDT vs. total crypto market capitalization. Source: TradingView
The poor performance of DPI (decentralized finance) can be seen as a result of tradingView’s first availability of data for DPI/MVI on May 29, 2021. This is when the total market cap has increased 19.82%.
The Metaverse index has seen a 103% increase in value over the same time period as Ether (ETH) and even more when compared to USD.
MVI/USD 1-day chart. Source: CoinGecko
The chart shows that MVI’s price has increased from $42.02 May 29 to $118.06 today. This represents a 180% increase compared to the 20% total market cap.
The past six months have seen a lot of positive developments in the market. It has been beneficial to invest in a portfolio of non-fungible token (NFT), related projects.
Tokens in Metaverse Index Source: Index Cooperative
Since their launch, both the Data Economy Index (and Bankless DeFi Innovation Index) have posted losses. This is in line with the overall performance of the crypto market, which has been trending down since its peak in November 2022.
NFTs are one of the most popular sectors in the last year. However, finding the next big crowd pleaser is difficult because there are dozens of new NFT projects being launched every day.
The NFT Index (NFTI) is another option for exposure. It contains 11 tokens, including Polygon (MATIC), ApeCoin(APE), The Sandbox [SAND] and Decentraland.
NFTI/USD 1-day chart. Source: CoinGecko
The current price for NFTI is $1,724, up nearly 350% from its March 5th, 2021 price of $386. The total crypto market capitalization increased by 30% during that time period, a sign of the NFT market’s strength over the past thirteen months.
Those looking to be exposed to crypto baskets in a more regulated setting can use eToro multi-asset brokerage to have access to several smart portfolio options that have been performing well over the last year.
Top 2 smart portfolios. Source: eToro
The Napoleon-X smart portfolio consists of some of the most well-known projects in crypto markets, such as Bitcoin (BTC), Ether (BNB), Litecoin(LTC), and Cardano [ADA]. The DeFiPortfolio includes a large amount of Ether as well as smaller amounts to other projects in the DeFi sector, such Polygon or Algorand.
These portfolios have shown returns of 48.6% & 45.3% respectively over the last year, while total crypto market capital has fallen 5.71% in that same period.
A number of eToro portfolios offer returns exceeding 430% over a two-year period, including Napoleon-X which has seen a 709.3% increase. The total crypto market cap increased by 808% during that time, and the price of BTC increased by 472%.
The top portfolios in the last 2 years. Source: eToro.
Indexes can capture a larger percentage of market gains while providing a higher return. This is often a better strategy than trying to select individual tokens that will make the greatest gains.
DeFiPortfolio’s results also show the importance of profit taking when large gains are made. They have a tendency slip away as traders move or whipsaw price movements.
You would like to learn more about investing and trading in the crypto markets?
Hashdex launches Web3 and smart contracts ETFs on Brazil’s stock market B3Bitwise launches an NFT index fund for accredited investors. In addition, there is a mounting “vampire assault” on six cryptocurrency index projects. WisdomTree launches four cryptocurrency indexes in the United States. You should do your research before making any investment or trading decision.
Eileen Wilson –Technology and Energy
My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.