Bitcoin still represents a significant share of the digital asset market

Although bitcoin (BTC) represented nearly the entire digital asset market 10 years ago, the number of protocols developed has skyrocketed in recent years. In November 2014, when the first crypto index, the CoinDesk Bitcoin Price Index (XBX), was launched, bitcoin made up 91% of the entire crypto market share as measured by market capitalization. If investors wanted to invest in the crypto market, they could only use bitcoin or a tracking product. However, as the market grew, bitcoin’s dominance diminished, to the point that it is now less than half the market at 41%. But that hasn’t changed the appetite for bitcoin as the leading asset or for simple market exposure.

Major Crypto Assets by Percentage of Total Market Capitalization (Bitcoin Dominance Chart)

Moving beyond bitcoin into the largest, most liquid blue-chip digital assets

One of the most generally accepted ways to get the market beta in any asset class is with the largest, most liquid assets that are weighted by size. These types of indices are widely used in asset allocation, risk models, benchmarking, and passive investing. Therefore, the CoinDesk Digital Large Cap Select (DLCS) applies the traditional market index concepts of size and liquidity, along with select eligibility criteria, to cover the digital asset market. Although bitcoin represents less market share than it once did, digital assets are still emerging, so the landscape is heavily concentrated in the currency and smart contract platform sectors as well as BTC and ether (ETH).

Currently, DLCS covers over 83% of the total market capitalization (ex-stablecoins) by including BTC, ETH, ADA, MATIC and SOL holding 66.4%, 28.9%, 1.9%, 1.4%, and 1.3% respectively.

Large caps are most familiar, though multi-sector exposure is valuable

As in traditional markets, there is often demand for a more well-diversified exposure that covers a variety of sectors. Although DLCS covers most of the market by size, its current constituents are only assigned to the Currency and Smart Contract Platform sectors in CoinDesk DACS. Therefore, the CoinDesk Market Select Index (CMIS) includes the largest and most liquid digital assets from each of the DACS sectors that meet the select eligibility criteria. At the moment, 28 assets from five DACS sectors are market capitalization-weighted and account for approximately 89% of the digital asset market (excluding stablecoins).

Although the CMIS digital assets beyond those in DLCS add slightly more market cap coverage, CMIS offers exposure across sectors and allows investors to express sector views by using the individual Select Sector Indices as tools to manage exposures.

CoinDesk Market Select Index Sector Weights (Number of Assets)

As the crypto market continues to develop and become more complex with a greater number of digital assets that are less concentrated, DLCS provides a simple way to measure the market with the largest and most liquid assets that enable passive exposure to the asset class. However, CMIS provides greater exposure across the sectors with a broader set of select digital assets that include smaller but popular sectors such as DeFi and Culture & Entertainment.