CF Benchmarks, a cryptocurrency index provider, has launched an index that aims to accurately reflect the circulating supply of each comprising crypto (or index constituent). The CF Benchmarks Ultra Cap 5 is fully rules-based and free float market capitalisation weighted. The index represents more than 75 per cent of the entire crypto asset class’s market capitalisation and is calculated every second, 24/7, 365 days a year. Investors now have a true gauge of crypto market beta. Additionally, financial services providers can use the new index to create investment products with a UK FCA-regulated benchmark.
“In a first for the industry, we are proud to provide a unique index whose strengths include transparency, market readiness and regulatory integrity. We are excited and proud to be able to provide the market with a reliable measure of crypto market performance that can pave the way for regulated financial products that reference a crypto portfolio,” says CF Benchmarks CEO, Sui Chung. “All aspects of the CF Ultra Cap 5 Index’s calculation, maintenance and governance are transparent. The new index can immediately be replicated by a passive fund or ETF or used for measuring relative performance of an active fund with minimal tracking error and trading costs.”
Will Cai, a partner at investment manager Wilshire Phoenix, says: “With the crypto space garnering increased attention from large institutions, CF Benchmarks’ indices are elevating standards of price integrity and regulatory governance in the asset class, providing tools and products that are transparent and robust. CF Benchmarks’ Bitcoin Reference Rate (CME CF BRR) was a trailblazer in crypto benchmarks and we use it with confidence in our own products. We are looking forward to CF Benchmarks’ new portfolio index offering.”
The new index represents a market capitalisation USD226.5 billion at launch, to put this into context when the UK equity benchmark FTSE-100 was launched in January 1984 its market capitalisation was just GBP100 billion (USD402 billionn in 2020 when adjusted for inflation).
The new index and its constituent prices are calculated through proprietary methodologies, validated by research and development and honed by the group’s unmatched experience of index construction. Critically, these methodologies include liquidity screening to ensure smooth replication and free-float weighting to maintain constituent weights proportionate to the amount of cryptocurrency readily available for trading.
As well as helping to develop the financial ecosystem around crypto assets, the new index also enables the wider financial community to follow the performance of the asset class through a simple index value that is free of the regulatory and integrity questions that dog other indices. This will greatly alleviate frictions around measuring the market and its dynamics that institutional investors often encounter when trying to analyse this asset class.