Retail trading application Invstr announced the launch of a cryptocurrency index this Tuesday.
The Invstr Crypto Index, which is now available to Invstr app users, aims to help investors track price fluctuations in the cryptocurrency market.
Investors can also compare the price performance of specific cryptocurrencies against the overall index.
A statement released by the firm indicates that the new index will cover a range of different digital assets, including utility tokens, security tokens, and payment coins.
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Unlike many indices, this new index does not weight assets according to their market capitalization. Instead, the firm has chosen to weight each token by its volatility.
Invstr CEO: volatility more important than market cap for retail traders
The assets that make up the index will also be adjusted on a quarterly basis. Invstr said that new cryptocurrencies would only be added to the index once they reach a certain level of price maturity.
“Traditional indices measure impact on the asset class not an investor’s portfolio,” said Invstr CEO Kerim Derhalli. “If you are a large fund manager you want to know what impact you will have on the market when you enter or exit an asset class. This is not a relevant consideration for smaller investors who want to know what the impact will be on their portfolios. The Invstr Crypto Index addresses this by using weightings that optimise risk-reward based on the volatility of the constituent assets”.
Derhalli’s firm has analyzed the advantages of holding cryptocurrencies in a diversified portfolio.
The company says that it found retail investors, who have a minor exposure to cryptocurrencies in their portfolio, can improve the returns on that portfolio and reduce the volatility of its returns.