Index trackers are among the most popular investment vehicles among retail investors. Instead of trying to beat the market by selecting a handful of securities or assets, passively investing in a market’s index typically yields better returns.
Crypto investors also have the ability to “buy the market” or invest in certain market segments by purchasing crypto index tokens.
Read on to learn more about crypto index tokens and discover a list of leading index tokens you could add to your crypto portfolio.
What is a Crypto Index Token?
In traditional finance, an index fund tracks the performance of a specific market benchmark, such as the S&P 500, NASDAQ, or EURO STOXX 50.
Crypto index tokens track the performance of a specific market index, which typically tracks a subset of the global crypto markets.
Before we look at the list of available crypto index tokens, let’s first look at the benefits of holding these tokens versus building your own portfolio from scratch.
A simple investing process
The process of researching individual cryptoassets can be time-consuming and often requires significant technical and financial knowledge. This can prove to be a challenge to some investors. A crypto index token allows investors to gain broad exposure to the crypto market or a specific subset of the market, simplifying the investment process for newcomers.
If you are looking to build a diversified crypto portfolio that provides you with broad crypto market exposure, buying an index token allows you to do that with one single purchase.
Trading cost reduction
When you are buying a basket of cryptoassets, you will have to pay trading fees for each purchase as well as exchange withdrawal fees to store your assets in a personal wallet. You can drastically reduce the impact of these fees by purchasing one or several index tokens as opposed to dozens of individual digital currencies and tokens.
Top Cryptocurrency Index Tokens
Now, let’s take a look at five leading crypto index tokens you could add to your portfolio today.
Total Crypto Market Cap Token
Total Crypto Market Cap Token (TCAP) is an ERC-20 token that provides you with real-time exposure to the total cryptocurrency market capitalization.
TCAP also allows you to earn fees by minting TCAP tokens and providing liquidity on decentralized exchanges (DEXes), as well as offering arbitrage opportunities.
TCAP is pegged to the price of the total crypto market cap using Chainlink (LINK) oracles, which enable the token to aggregate several data points from top crypto data providers. The data is then pushed on-chain using Ethereum (ETH) smart contracts.
When minting TCAP you can speculate on longing or shorting the total crypto market cap. It is important to note that there is a 150% minimum collateral ratio to prevent you from being liquidated.
There are zero fees charged for the trading of TCAP by the issuer on the secondary market. Moreover, there are no issuer fees for minting new tokens in the Cryptex protocol. However, you will be charged a 1% burn fee, which is allocated for future Cryptex decentralized autonomous organizations (DAO) developments.
TCAP Price Statistics:
- Current price: USD 339.56
- Market capitalization: USD 7,722,306.87
DeFi Pulse Index Token
DeFi Pulse Index (DPI) is a cryptoasset index that tracks the performance of digital assets within the decentralized finance (DeFi) industry. The index is weighted based on the value of each portfolio constituent’s circulating supply. DPI aims to track DeFi projects that have a significant following and continue to invest in R&D.
DPI Price Statistics:
- Current price: USD 341.77
- Market capitalization: USD 192,052,983.46
NFT Index Token (NFTI)
NFT Index Token (NFTI) is a digital token designed to track the performance of digital assets in the non-fungible token (NFT) space. The index is weighted according to the value of each digital asset’s circulating supply and liquidity. The focus of the index is to track NFT protocols that contribute to the space through development and maintenance.
NFTI Price Statistics:
- Current price: USD 3,253.60
- Market capitalization: USD 7,237,467.27
CRYPTO20 Index Token
CRYPTO20 Index Token (C20) is a digital asset index that allows you to track the performance of the top 20 cryptoassets. The underlying digital assets include ETH, ADA, BTC, BNB, SOL, DOGE, SHIB, AVAX, LUNA, and many more.
The C20 tokens are directly tied to the underlying digital assets, but you can opt to liquidate using a smart contract provision. This serves to ensure the asset price never falls below the token’s share of the underlying asset.
You can trade C20 tokens on Invictus Capital, HitBTC, and SushiSwap.
C20 Price Statistics:
- Current price: USD 4.85
- Market capitalization: USD 193,199,044.05
Degen Index Token
Degen Index (DEGEN) is a token representing an index of the most promising Ethereum projects that have the potential for future growth. DEGEN is currently in beta mode and more details may be forthcoming in the coming months.
DEGEN Price Statistics:
- Current price: USD 6.01
- Market capitalization: n.a.
While index tokens are not a one-size-fits-all solution for all crypto investors, they provide a cost-effective way to gain exposure to specific market segments, such as large-cap coins, DeFi, and the NFT market.