IC15 India’s first Crypto Index

Q Why is it in News ?

A Superapp CryptoWire recently launched India’s first cryptocurrency index, IC15, which will measure the performance of the 15 most widely traded cryptocurrencies listed on leading crypto exchanges by market capitalization.

Q What is IC15?

A

• CryptoWire constituted an Index Committee of domain experts, industry practitioners, and academicians that will select cryptocurrencies from the top 400 coins in terms of market capitalization.
• The eligible cryptocurrency should have traded on at least 90% of the days during the review period and be among the 100 most liquid cryptocurrencies in terms of trading value.
• Also, the cryptocurrency should be in the top 50 in terms of the circulating market capitalization.
• The committee will then select the top 15 cryptocurrencies. The index will be reviewed quarterly.

Q What is its significance?

A 

• IC15 can be replicated for creating index-linked products such as index funds or exchange-traded funds (ETFs).
• Usually, the performance of a mutual fund scheme is assessed with reference to a benchmark, which could be a total return index of the Nifty or the Sensex.
• IC15 is the first index in India that can act as a benchmark of the underlying cryptocurrency market and the performance benchmark for fund managers.
• Moreover, robo-advisors, which provide financial advice with moderate to minimal human intervention, can use this index to create investment products at lower costs.

Q How  does  IC15  correlate  with other market indicators?

A

• IC15’s base value as on 1 April 2018 was 10,000.
• It would mean that the index has gained 615% in absolute terms to 71,475.48 till 31 December 2021.

Q Can  index-based  crypto investment reduce risks?

A 

• Index investing can be an effective way to diversify against risks as a fund invests in a basket of assets against a few limited coins.
• However, index-based investing may not fully remove risks associated with investing in crypto assets.
• Case in point: IC15 saw a 50% plunge in 2018, whereas other asset classes have seen a maximum drop in the range of 3-4%.
• Further, bitcoin and ethereum have a combined weightage of 77% in the index, making it highly vulnerable to any volatility in these two coins.

Q Can crypto funds be launched in India?

A 

• SEBI has recently asked mutual fund houses not to launch crypto-based funds until the Centre comes out with clear regulations.
• This means asset management companies for now won’t be able to launch crypto funds based on IC15.
• However, in the absence of any regulations, crypto platforms can offer products based on the index.
• Global crypto investment platform Mudrex last year launched Coin Sets—crypto funds based on themes such as decentralized finance or market cap.