Explained: How does IC15, India’s first cryptocurrency index, work? How will it help investors? – CNBCTV18

The cryptocurrency market is growing rapidly in the country. Reports suggest nearly 8 percent of Indians now own cryptos. According to a November 2021 report by crypto research and intelligence business CREBACO, Indias investment in cryptocurrencies ballooned to more than $10 billion from $923 million in April 2020.

After a significant run-up in 2021, cryptocurrencies have entered a correction phase. The impending cryptocurrency regulation bill and the Reserve Bank of India's warnings against the use of cryptos have also kept cryptos under pressure. The crypto market is more volatile than the stock markets and can prove risky for investors, particularly retail investors who invest without proper knowledge. While some popular platforms such as WazirX and CoinSwitch Kuber were so far facilitating crypto trading, there was no dedicated crypto index in the country yet.

Read on to know what this index is all about and what it means for crypto investors in the country.

How does the IC15 index work?

The IC15 will feature the 15 most traded cryptocurrencies listed on leading crypto exchanges across the world by market capitalisation. The index is similar to the Nifty 50 that features the 50 most prominent players in the capital markets across sectors.

How will the IC15 index help investors?

The objective of the IC15 is to provide insights to investors about index-related products like crypto funds and exchange-traded funds (ETFs). A crypto ETF tracks the performance of single or multiple digital tokens that comprise the fund. Based on buying and selling activity, the price of crypto ETFs also fluctuates. Just like equities, crypto ETFs are also traded daily.

Moreover, the index will also provide information on crypto mining and the performance of the broader crypto market. While its purpose will remain to educate, it will open diversification options for investors who wish to dabble in other crypto blockchains and tokens.

The IC15 could eventually become a benchmark for fund managers to gauge the performance of underlying cryptocurrencies and related products and will be a representative of the market sentiment.

Who will decide on the 15 cryptocurrencies covered by the IC15 index?

The IC15 index will be managed by an Index Governance Committee formed by CryptoWire that will consist of crypto experts, accomplished academics, and industry veterans. The committee will select 15 cryptocurrencies out of the top 400 cryptocurrencies by market capitalisation.

Which cryptocurrencies will be covered by IC15?

To qualify for a position on the list, a cryptocurrency:

How will the Index Value be calculated?

This is a pre-weighted index, which means each cryptocurrency will be given a weightage proportionate to its price per token. In the case of IC15, the weightages are as follows:

On the base date, the divisor will be computed using the total market capitalisation of all index participants. The index undergoes normalisation during every rebalancing period, during which it is multiplied with a certain normalizing factor.

The base value of the IC15 is 10,000, and the base date will be considered as April 1, 2018. This means, as of December 31, 2021, the index has made absolute gains of 615 percent to 71,475.18.

The index will be constantly monitored and scrutinised for review and rebalancing on a quarterly basis. The cut-off date for reviewing has already been set at the 15th calendar day in the months of March, June, September, and December.

(Edited by : Yashi Gupta)

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Explained: How does IC15, India's first cryptocurrency index, work? How will it help investors? - CNBCTV18