Full Details of What Bloomberg Calls ’First Institutional Grade Benchmark for the Cryptocurrency Market'

Siamak Masnavi
  • Bloomberg has launched a new index called Bloomberg Galaxy Crypto Index (BGCI) that is designed to track the performance of the largest, most liquid portion of the cryptocurrency market.
  • At inception date (3 May 2018), the index had ten cryptocurrencies, and the base value of the index was 1000.
  • It is believed that this index will make it easier for institutional investors to put money into the crypto market.

Bloomberg, in partnership with Galaxy Digital Capital Management, has launched the Bloomberg Galaxy Crypto Index (BGCI), what it calls in its press release the "first institutional grade benchmark for the cryptocurrency market."

Galaxy Digital Capital Management, nicknamed "Goldman of Crypto", is a New York based merchant bank founded earlier this year by billionaire Mike Novogtaz, a former Goldman Sachs partner and macro hedge fund manager at Fortress Investment Group. The aim of the bank is to "trade crypto as well as make principal investments, manage assets for other clients and provide advice on blockchain-related ventures."

BGCI is a benchmark designed to track the performance of the largest, most liquid portion of the cryptocurrency market. It is market capitalization-weighted, and measure the performance of ten USD-traded cryptocurrencies. The index's constituents are diversified across different categories of crypto assets, including stores of value, mediums of exchange, smart contract protocols, and privacy assets. Although BGCI co-branded with Galaxy Digital Capital Management LP, it is owned and owned by Bloomberg Index Services Limited. The index can be accessed on the Bloomberg Terminal via ticker "BGCI Index."

According to the BGCI Fact Sheet, these are some of its key features:

  • The pricing sources are assessed for risk and suitability.
  • It is calculated using Bloomberg Crypto Price Fixings (CFIX).
  • It is rebalanced and reconstituted every month.
  • It uses a rules-based index methodology.
  • It uses the strength of Bloomberg's index capabilities (data, pricing, analytics, distribution, and research).

Bloomberg uses the following guiding principles to administer the index:

  • Data Integrity -- pricing sources are chosen on the basis of liquidity and reliability; cryptocurrencies must meet minimum thresholds for daily traded USD value.
  • Diversification -- no single constituent can exceed 30% or contribute less than 1% of the market cap of the index.
  • Representation -- the index tries to serve as a proxy for the broader cryptocurrency market.
  • Continuity -- although the index needs to be responsive to changes in the market, it must adapt to these changes such that the character of the index is not completely reshaped from year to year.

Here are the main selection criteria for the index constituents:

  • Trades in USD.
  • At least two eligible pricing sources that meet Bloomberg's "due diligence" criteria.
  • Minimum 30-day median daily value traded of $2 million (across at least two eligible pricing sources).
  • Free-floating pricing.
  • The cryptocurrency must meet the above requirements for three consecutive monthly rebalances.

At inception (3 May 2018), the index constituents and their weights are as follows:

  1. Bitcoin ​​30.00%
  2. Ethereum​​​ 30.00%
  3. Ripple 14.14%
  4. Bitcoin Cash 10.65%
  5. EOS 6.11%
  6. Litecoin 3.77%
  7. Dash 1.67%
  8. Monero 1.66%
  9. Ethereum Classic 1.00%
  10. Zcash 1.00%

Further information about BGCI's index methodology can be obtained at the Bloomberg Indices website .

This is what Mike Novogratz had to say about the new index in an interview with CNN Money:

We are hoping that this index will become the bellwether and benchmark for the whole crypto space... that hedge funds are compared to it and that it is seen as this kind of watershed moment where crypto starts to become an investible asset class from an institutional perspective.

Mike Novogratz, Founder & CEO of Galaxy Digital Capital Management

 

 

Feature Image Credit: "Wall Street" by "Glen Scarborough" via Flickr; licensed under "CC BY 2.0"

Weekly Newsletter