Cryptocurrency Index (CRIX)
CRyptocurrency IndeX (CRIX) is a benchmark for the crypto-currency market.
A collaboration project from Humboldt University Berlin Germany, SKBI at Singapore Management University, and budapesht.
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What is CRIX?
The CRyptocurrency IndeX (CRIX) is a benchmark for the crypto-currency market.
With the growing amount of crypto-currencies and the diminishing domination of Bitcoin in the market, an index became necessary to track its development on the exchanges like the S&P500 does the same for the US stock market.
Commonly, a fixed amount of index constituents is chosen to represent the market. The chosen assets are allowed to change, based on transparent rules, but it happens in the big markets seldom.
But the market of crypto-currencies is different from fiat asset markets on many levels. One important difference is the frequently changing market structure. Due to the frequent changes a fixed number of constituents is a difficult choice.
For this reason, a team of researchers from Humboldt University at Berlin developed a methodology to amend the number of constituents in case the current market situation requires more crypto-currencies for an adequate representation of the market development.
The CRIX is realtime computed by the Ladislaus von Bortkiewicz Chair of Statistics at Humboldt University at Berlin, Germany. The development was a joint work together with SKBI at Singapore Management University and budapesht, who provide the data for the computation.
CRIX Formula: CRIX is a market capitalization weighted index. This means the weight of a cryptocurrency in CRIX depends on its market capitalization compared to the other cryptocurrencies in CRIX.
Reallocation of the number of constituents: Every 3 month the development of the cryptocurrency market in the last 3 month is evaluated. It is checked how many of the top cryptocurrencies need to be part of CRIX to ensure a close fit to the market development. Due to the very volatile behavior of the cryptocurrency market and the frequent market structure changes, this approach showed to be effective. In case of a necessary change, the number of constituents is amended. A related approach is used for the well known CRSP indices for the US stock market.
Ranking for constituents in CRIX: At the end of every month, the selected constituents are reallocated. The cryptocurrencies with the highest market capitalization are chosen and their weight in CRIX correspond to the share of the total market capitalization of all cryptocurrencies in CRIX.
The number of constituents in CRIX is always a number evenly dividable by 5. Therefore, CRIX can contain 5, 10, 15, … constituents. The higher the number, the more cryptocurrencies are necessary for an adequate market representation.
CRIX is constructed such that only price changes of a cryptocurrency cause a change of the index development. CRIX neither reacts to an increase in the number of available coins nor to the inclusion of a new cryptocurrency into the index.
Reallocation: The reallocation period of the CRIX is 1 month to ensure that the index is always up to date. This period is taken rather short such that the CRIX can react faster to changes in the crypto market.
a. If the price of a cryptocurrency is not available from the exchanges due to any reason, CRIX is made insensitive to this event such that the development of CRIX is not affected by this situation.
b. If a cryptocurrency vanishes from the market while being part of CRIX, CRIX is made insensitive to this cryptocurrency until the next reallocation date. Then the corresponding cryptocurrency will be kicked out of CRIX.
For more details about the CRIX methodology and research papers conducted on CRIX, please see the paper and the website.