Bloomberg Galaxy Crypto Index (BGCI)

What is Bloomberg Galaxy Crypto Index (BGCI)?

The Bloomberg Galaxy Crypto Index (BGCI) is a benchmark designed to track the performance of the largest and most liquid cryptocurrencies traded in USD. It’s a collaboration between Bloomberg and Galaxy Digital Capital Management, aiming to provide a reliable measure of the overall crypto market. The index serves as a tool for investors to gauge the market’s health and make informed decisions.

The BGCI is actively managed, with its constituents regularly reviewed and adjusted to reflect changes in the market. This dynamic approach ensures the index remains relevant and accurately represents the leading cryptocurrencies. The criteria for inclusion focus on market capitalization and liquidity, ensuring that only the most established and actively traded assets are included.

This index is also available as an Index Decentralized Token Folio (DTF) which is an onchain portfolio that bundles multiple crypto assets into a single token. It is deployed and curated by Re7 Labs on the Reserve Protocol. The Reserve Protocol supports Yield DTFs and Index DTFs.

How Does BGCI Work?

The BGCI operates by selecting and weighting cryptocurrencies based on their market capitalization and liquidity. A specific set of rules determines which cryptocurrencies are eligible for inclusion in the index. These rules are designed to ensure that the index accurately reflects the overall performance of the cryptocurrency market.

The index uses a market capitalization-weighted approach, meaning that cryptocurrencies with larger market caps have a greater influence on the index’s overall performance. However, the BGCI also employs diversification rules. Each constituent can represent no more than 35% and no less than 1% of the Index’s overall value, limiting the dominance of any single cryptocurrency and promoting diversification.

Monthly reviews and adjustments are conducted to ensure the index remains current and representative. This process involves assessing potential additions and removals based on the established criteria. This dynamic approach ensures that the BGCI accurately reflects the evolving landscape of the cryptocurrency market.

BGCI Key Features and Technology

One of the key features of the BGCI is its focus on transparency and objectivity. The index rules are publicly available, providing clarity on how constituents are selected and weighted. This transparency is essential for building trust and confidence in the index as a reliable benchmark.

The BGCI’s methodology incorporates both market capitalization and liquidity criteria, creating a more robust and representative index. By considering liquidity alongside market cap, the index ensures that only actively traded cryptocurrencies are included. This focus on liquidity helps to mitigate the impact of potentially volatile or illiquid assets.

As an Index DTF the BGCI utilizes blockchain technology to bundle and represent its holdings. This is achieved by deploying the index on the Reserve Protocol.

What is BGCI Used For?

The primary use of the BGCI is as a benchmark for evaluating the performance of the cryptocurrency market. Investors and traders can use the index to gauge the overall health of the market and compare the performance of their own crypto portfolios. It helps to understand the general trend of the crypto market.

The BGCI serves as the underlying asset for investment products such as exchange-traded funds (ETFs) and other financial instruments. These products provide investors with a convenient and diversified way to gain exposure to the cryptocurrency market. They track the BGCI’s performance, giving investors a simple method to track the overall market.

Financial analysts and researchers use the BGCI to conduct market analysis and develop investment strategies. The index’s historical data can be used to identify trends and patterns in the cryptocurrency market. This data-driven approach can aid in making more informed investment decisions.

How Do You Buy BGCI?

Because BGCI is an index, you cannot directly purchase it like a cryptocurrency. However, you can gain exposure to the cryptocurrencies that it tracks in several ways. One way is to purchase each of the cryptocurrencies that are in the index in the same weight as the index dictates.

Exchange Traded Funds (ETFs) that are built to mimic the makeup and movements of the BGCI are another method to follow the index. Be sure to review all fund information and details before investing. Check that the fund follows the index closely and review any fees.

Index Decentralized Token Folios (DTFs) like the BGCI are available. These DTFs bundle multiple crypto assets into a single token. They are onchain portfolios that can be found on decentralized exchanges (DEXs).

How Do You Store BGCI?

Since BGCI is an index, you do not directly store it. Your storage options depend on how you choose to gain exposure to the index. If you buy each cryptocurrency separately you would need to use one or more of the wallet options below.

Hardware wallets, like Ledger and Trezor, are physical devices that store your private keys offline, offering a high level of security. Software wallets, such as Trust Wallet and MetaMask, are applications you install on your computer or smartphone, offering convenience and accessibility. These wallets each support a range of cryptocurrencies included in the BGCI.

Exchange wallets are also an option, but it is important to understand the risks involved with leaving your crypto on an exchange. If you are using an Index DTF, your wallet options will depend on the protocol used to create the DTF. Check supported wallet options before purchasing.

Future Outlook and Analysis for BGCI

The future outlook for the BGCI is closely tied to the overall growth and adoption of the cryptocurrency market. As more institutional investors enter the space, the demand for reliable benchmarks like the BGCI will likely increase. This increased adoption could lead to the development of more investment products based on the index.

The ongoing evolution of the cryptocurrency market presents both opportunities and challenges for the BGCI. The index must continue to adapt to new trends and technologies to remain relevant and representative. The continuous monitoring and adjustment of the index’s constituents will be crucial in this regard.

Continued innovation in decentralized finance (DeFi) and the emergence of new digital assets will also influence the future of the BGCI. It will be important to determine if and when to include such assets in the index. This will impact the index’s ability to accurately reflect the broader cryptocurrency landscape.

References

• CoinGecko
• CoinDesk