Royalton CRIX Crypto Index

ROYALTON CRIX CRYPTO INDEX

Royalton CRIX Crypto Index was developed by professor Wolfgang Karl Härdle and his team of researchers from Humboldt University in Berlin and acquired by Royalton Partners in 2021. The index allows to trace the evolution of diverse and fast changing crypto market with small number of constituents.

Royalton CRIX Crypto Index is calculated by Royalton Partners AG. Historical data are available from 16 March 2018.

In case you are interested in licensing the index, please contact us at [email protected].

The composition of the index is not published on this website. Access to the index constituents can be licensed from Royalton Partners AG.

This website: www.royalton-crix.com presents technical data including detailed methodology and historical performance since inception. Please note that the data presented on the www.royalton-crix.com website are not intended for commercial use and presented only on “as is” basis subject to Terms of Use. Please note that for the years 2016-2018, Royalton CRIX Crypto Index was calculated using different data source than for commercially distributed index data.

CRYPTO MARKET INDEXING CHALLENGE

The cryptocurrency market is unique: volatile with frequently changing market structure where new cryptocurrencies emerge and vanish daily. Following market developments becomes a challenge.

As cryptocurrencies became an investable asset class, a need for an index product emerged.

Some currency indices already exist. Fiat currency markets have SDR offered by the IMF. Prior to the launch of EUR, the ECU existed, which was an index representing the development of European currencies. Typically, index providers decide on a fixed number of constituents to represent the market. It is usually a challenge to agree on a fixed set of constituents and rules. In the frequently changing cryptocurrency market, this challenge is even more severe.

ROYALTON CRIX CRYPTO INDEX SOLUTION

An intuitive choice of index constituents would consider a large number of coins in order to represent the underlying market well. Conversely, financial practice has shown that inclusion of too many smaller coins creates liquidity and tradability issues. Given the rapidly evolving nature of many cryptocurrencies in conjunction with possible liquidity problems for smaller index candidates, the necessity for a tradeoff is evident.

The diversified nature of the cryptocurrency market makes the inclusion of smaller coins in the index critical to improve tracking performance. The research of Professor Härdle has shown that assigning optimal weights to selection of constituents helps to reduce the tracking error of a cryptocurrency portfolio, despite the fact that market caps of some constituents are much smaller relative to Bitcoin.

Methodology

Royalton CRIX Crypto Index:

The Royalton CRIX Crypto Index is a market index and follows the Laspèyres construction. The index of Laspèyres is defined as

with Pit the price of the crypto i at time point t and Qi0 the amount of crypto i at time point 0. Pi0 is the price at time point 0. The Royalton CRIX Crypto Index is a slight modification

where MVit is the market capitalization of the crypto i at time point t. The Divisor ensures that the changes are stable. The Divisor is

The starting value of the Royalton CRIX Crypto Index is therefore 1000. Whenever the amount of coins of a crypto changes, the Divisor is adjusted. This ensures that only price changes cause changes in Royalton CRIX Crypto Index.

Divisort-1 is the Divisor before the change in the amount of coins and Divisort directly afterwards.

Constituents

It may happen, that a crypto has a high market capitalization, but is not traded frequently. One modified version of a liquidity rule from the STOXX Japan 600 and the AEX Family is employed. The applied rule is the following:

where ADTV0.25 is the 0.25 percentile of the ADTV distribution of all cryptos in the last period and ADTVi is the ADTV of a single crypto.

If a crypto fulfills the rule, it is eligible for the Royalton CRIX Crypto Index set of constituents.

Number of Constituents

A fixed number of constituents may be a good approach for relatively stable markets. The amount of constituents in the Royalton CRIX Crypto Index is computed using a dynamic approach based upon the CRIX Technology Decision Criterion (CTDC).

(US Patent Pending; Docket Number: RPAG-100USP; U.S. Patent Application Serial No.: 63/183,373)

Weights

Each crypto in Royalton CRIX Crypto Index is weighted with its market capitalization.

Reallocation

Each quarter, the constituents are reevaluated.

Each month, the constituents are rebalanced.