How Much Is Your Cryptocurrency Worth? – Let’s Use Crypto-Indices

Cryptocurrency commemorative coins (own work)

Summary

  • It has little sense to compare your altcoins with Bitcoin.
  • Same as sectors in stock markets can be very different and comparisons useless.
  • Let’s make and use cryptocurrency indices.
  • Some of them exist but are very poorly documented.
  • Was Steem better than the sector index?

In the “traditional investment world”, the media is always mentioning a lot of stock indices. Every day, every hour. “The S&P 500 index today”, “the German DAX index yesterday”, “the VIX, also known as the fear gauge” and so on. Indeed, indexes are useful to measure the overall sentiment, the mood of investors on a certain market. Although those are far less popular, bonds, foreign exchange (currency), real estate or commodities indices also exist.

How to deal with Bitcoin dominance?

Cryptocurrency indices are also referenced only seldom. One of the reasons is the very strong “Bitcoin dominance”, at the time of writing, 66.8 percent. Two-thirds of the 209 billion dollars crypto-market value are Bitcoins. For this reason, many people simply use Bitcoin to describe the market and forget the other cryptos. As I wrote before, some cryptocurrency indexes are also ignoring Bitcoin dominance, making the index distorted. Others, like the Bloomberg Galaxy Crypto Index (BGCI) are using artificial weightings. Capping (limiting) the weight of the larger cryptos to some extent. By the BGCI, Bitcoin and Ethereum have 30-30 percent, XRP, 21.8 percent of proportion as on the 1st of December.

How much is your cryptocurrency worth?

But there are many other, very promising cryptocurrencies, with different purposes and functions far from Bitcoin. There are whole families of cryptos, altcoins. See for example the “periodic table of cryptocurrencies” (here or here), I think several versions exist.) Coins for payments, privacy cryptos, fintech, gaming & media & social, business & enterprise use cases… I think no one of the stock market professionals would ever compare coal mine shares with social media, or Brazilian banks with Australian retail, Japanese energy. Every industry and region is different, you can’t compare apples to oranges – it would be an unresolvable and useless comparison.

Make altcoins great again

The adequate solution is to make sector indices, just like on the stock markets. The Dow Jones Industrial Average is only one member of a broader index family (Dow Jones Transportation, Dow Jones Banks, Dow Jones Retailers, etc.). We need sector indices like “Crypto Fintech”, “Crypto Media & Social”, “Crypto Privacy” and so on. It would also help to show the world that cryptocurrencies, altcoins have so many purposes. The crypto industry means not only Bitcoin and Ether, maybe XRP and Litecoin.

Table: Fundstrat cryptocurrency indices (source: Fundstrat weekly letter)
Table: Fundstrat cryptocurrency indices (source: Fundstrat weekly letter)

So, how much is your cryptocurrency worth? The good news is I see some similar development in the crypto space. Fundstrat announced 11 crypto indexes in October 2018. Six are capitalization-weighted, or equal-weighted, some of them reducing the overweight of Bitcoin and emphasizing altcoins. The other five are sector indices.

Never for the public?

The five indexes are Commodity, Platform, Privacy, Exchange and Stablecoin oriented. That all sounds very interesting, but the problem is, these indices aren’t documented. Or, very probably, only for professional investors. (Which are paying their expensive Reuters terminal or Bloomberg monitor).

Fundstrat sector indices (Chart courtesy of Tradingview.com)
Fundstrat sector indices (Chart courtesy of Tradingview.com)

We can follow the indexes on Tradingview, thought, data for the three summer months of this year seem to be missing. On the chart, Commodity and Exchange-oriented indices followed Bitcoin closely in the last 12 months. Platform and Privacy indices underperformed.

For Steem lovers

For my readers on Steem, let’s draw a second chart. In the last 365 days, Bitcoin surged 80 percent. The Fundstrat Crypro Platform Index (FSTOKPLT) seems to be the closest one to the use cases of Steem. Its value increased 14 percent in one year. Steem fell 64 percent, nearing all-time lows of around 0.07 USD. (USD 0.069192 On March 10, 2017.)

Fundstrat Platform sector index, Steem, and Bitcoin (Chart courtesy of Tradingview.com)
Fundstrat Platform sector index, Steem, and Bitcoin (Chart courtesy of Tradingview.com)

I couldn’t find evidence if Steem was included in any of the sector indexes. (It was included in the “FS CryptoFX 40 index” before as its capitalization rank was higher.) I found Stellar, Cardano, Bytom, Stratis, EOS, NEM, Ethereum, Qtum, Waves, NEO, Lisk, Ethereum Classic, VeChain and IOTA in the platform index in 2018.

Disclaimer

I’m not a certified financial advisor nor a certified financial analyst, accountant nor lawyer. The contents on my site and in my posts are for informational and entertainment purposes and reflecting my collection of data, ideas, opinions. Please, make your proper research, or consult your advisors before making any investment or financial or legal decisions

Disclaimer 2

I have Steem, Ether and Bitcoin at the moment.

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