Cryptocurrencies gained more legitimacy as financial instruments with the recent news that MV Index Solutions, the index provider subsidiary of USD43billion fund management firm VanEck, had launched a series of digital asset indices.
Thomas Kettner, Managing Director at Frankfurt-based MVIS and Gabor Gurbacs (pictured), Director, Digital Assets Strategy at New York-based VanEck explain that there is a physical and metaphorical wall between the two companies that allows MVIS to be the first regulated, unaffiliated and industry standard index provider to offer a family of digital asset indices.
Gurbacs says: “There is a separation because independence on the data side is very important. One of the most significant issues in the digital assets space is that none of the platforms offering digital assets and data are independent.”
MVIS worked with independent data provider CryptoCompare to construct the indices, using comprehensive digital asset pricing methodology incorporating pricing and trade data from over 50 major digital asset exchanges around the world.
The series includes 12 single digital asset indices, such as Bitcoin, Ether and Ripple and the following four multiple digital asset indices: the MVIS CryptoCompare Digital Assets 25 Index (MVDA25); the MVIS CryptoCompare Digital Assets 10 Index(MVDA10); the MVIS CryptoCompare Digital Assets 5 Index(MVDA5); the MVIS CryptoCompare Digital Assets 100 Index (MVDA).
Gubacs says: “We are super excited to have industry standard crypto indices. The MVDA10 is like the Dow Jones Industrial Average index, while the MVDA25 is like the S&P 500, so you can properly monitor cryptocurrencies now. The indices can potentially be used for active and passive portfolio strategies, futures contracts and other derivatives as well as further standard investment instruments.”
Kettner says: “The crypto topic gets more and more attention in the market as the performance is really great and there is no significant index provider yet.”
Gubacs adds: “When we look at an emerging asset class there are certain standards that need to be in place and, in my view, proper price discovery, unaffiliated industry standard indices, proper dissemination and an independent calculator is super important.
“We took a long term look at the digital assets markets and one of the major challenges was price discovery as digital assets are all traded on different exchanges with different prices, so we drew them all together and provide a global indices and facilitate fair price discovery. The price of Bitcoin varies across the world so we worked with CryptoCompare and pulled down data from 50 plus exchanges and applied quant and math models to address this important problem. Prices are weighted by volume on a 24/7 basis in order to facilitate global price discovery and best reflect the most accurate state of the digital assets markets.”
Kettner explains that these crypto indices are designed to underlie ETFs and derivatives, all the potential products that are equally available for equity and fixed income.
Gurbacs says: “We do think that digital assets have the potential to integrate with the broad economy and we need the basics with indexing in the proper way. Industry standard indexing is a great first building block. We now have a proper way to monitor the market which increases the likelihood of products. It’s very much an industry in the making so we are building it out from the bottom up and VanEck is committed to educating market participants and regulators on digital assets.”
