Amid increasing interest in the cryptocurrency markets, Bloomberg, the global leader among market data providers and index services, has launched the Bloomberg Galaxy Crypto Index (BGCI), which is “designed to track the performance of the largest, most liquid portion of the cryptocurrency market.”

Market-Cap Weighted: The First Major Crypto Index

The BGCI is a market cap-weighted index, which implies that cryptocurrencies with higher market cap will have a higher weight in the index. BGCI will consist of up to a maximum of 12 cryptocurrencies that are traded in U.S. dollars. At the launch, it has 10 cryptocurrencies including bitcoin, ethereum, monero, ripple and ZCash. The index constituents cover various facets of cryptocurrencies that include mediums of storage of monetary value and mediums of value exchange (for instance, bitcoin), smart contract protocols (ethereum), and privacy-focused digital assets (monero). (See also: The Five Most Private Cryptocurrencies.)

It will be rebalanced and reconstituted monthly, and each constituent​​​ weight will be between the range of maximum 30% and minimum 1%. If any cryptocurrency undergoes a hard fork leading to the birth of a new cryptocurrency, the above mentioned rules will apply for each new qualifying entry in the index to both the parent and child (forked-out) cryptocurrency.

The index starts with a base value of 1,000 as of start date of May 3, 2018. At the time of launch, the index had the following 10 constituents:

Cryptocurrency

​​Weightings

Bitcoin

 30.00%

Ethereum​​​ 

 30.00%

Ripple 

14.14%

Bitcoin Cash

 10.65%

EOS 

6.11%

Litecoin 

3.77%

Dash 

 1.67%

Monero 

1.66%

Ethereum Classic 

 1.00%

Zcash 

1.00%

Like several other market indexes, like the Dow and S&P 500, the Bloomberg Galaxy Crypto Index will offer a single value indicative of the performance of the top virtual currencies of the world. (See also: What the Dow Means and How It's Calculated.)

The index will join the family of other indexes administered by the Bloomberg Index Services Limited. Galaxy Digital Capital Management will help in co-branding.

While there already exist a few other cryptocurrency market indexes, the  Bloomberg launch marks the entry of a major player making it “the first institutional grade benchmark for the cryptocurrency market.” Others lesser-known indexes that exist include Crypto Currency Index 30 (CCi30), which tracks the top 30 cryptocurrencies with the largest market capitalization and is rebalanced monthly, and CRypto IndeX (CRIX) which includes 20 constituents based on a statistical methodology.

Addressing the growing interest in cryptocurrencies, Alan Campbell, global product manager for Bloomberg Indices, said, “The index brings our rigorous approach to index construction to cryptos and will provide investors with a transparent benchmark to gauge the performance of the broader market.”

Michael Novogratz, CEO and founder of Galaxy Digital Capital Management, said, “The Bloomberg Galaxy Crypto Index brings unprecedented transparency to the crypto markets. We are excited to help drive the decentralized revolution forward through the creation of BGCI.”

Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns no cryptocurrencies.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.