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The cryptocurrency market has changed the way we think about finance. With digital currencies changing how we trade, transact, and store value, benchmarks like the Nasdaq Crypto Index (NCI) bring much-needed order to this nascent world. Designed to give participants a clear view of the digital asset market, the NCI is a guide for investors looking to navigate this new asset class.
As a fintech leader offering cutting-edge blockchain solutions, ALT 5 emphasizes the importance of benchmarks like the NCI. Such indices provide traders and businesses with a better understanding of the digital asset landscape.
In this article, ALT 5 experts share their understanding of the Nasdaq Crypto Index and what it means for crypto enthusiasts.
What is The Nasdaq Crypto Index?
The NCI is a comprehensive benchmark that tracks a diverse basket of USD-traded digital assets. By applying rigorous liquidity, exchange, and custody standards, it provides a reliable view of the cryptocurrency market for investors.
In short, it is a selection of cryptocurrencies representing the broader market while being accessible and reliable for investors.
Here is how it stands out:
- Flexible: The NCI evolves as the crypto market grows; it adjusts its composition to stay relevant.
- Representative: It includes a mix of cryptocurrencies weighted by market cap, like Bitcoin (XBT), Ethereum (ETH), and Solana (SOL).
- Investible: Built on strict rules, it makes sure that assets meet high liquidity and custody standards.
How Does the NCI Work?
The NCI is rebalanced quarterly to reflect the current market’s state. To be included, assets must meet the following criteria:
- Traded on at least two Core Exchanges.
- Supported by at least one Core Custodian.
- Meet minimum liquidity and market cap requirements.
At its core, the NCI is governed by the Nasdaq Cryptocurrency Index Oversight Committee which oversees its methodology to ensure transparency and integrity.
Components and Weighting
As of the last update, the NCI includes major cryptocurrencies like Bitcoin (73.21%), Ethereum (16.53%), Solana (5.32%), Ripple (2.18%), and others. Each asset’s weight is based on its free float market capitalization relative to the total market cap of eligible assets.
This structure gives investors a clear view of the market dynamics, emphasizing larger, more established assets while still accommodating smaller, emerging ones.
Why Does the NCI Matter?
The cryptocurrency market is huge with thousands of coins and tokens. For participants, it may become overwhelming. The NCI simplifies this complexity by providing clarity. It aggregates top-performing cryptocurrencies and gives a well-balanced view of the market. Moreover, it builds trust as it relies on vetted exchanges and custodians. Lastly, the NCI enhances accessibility. Investors can track and engage with the crypto space without getting into the technical details.
Plus, by focusing on liquidity and compliance, the NCI is designed for institutional investors to drive further adoption of digital assets.
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