To reduce the known investment risk in this market segment, LIXX and Werte Invest Vermögensverwaltung of Cologne have developed highly complex evaluations for the selection of the included crypto assets and for rebalancing according to the respective market phase to calculate the Crypto Cycle Index.
The market for crypto assets continues to be an exciting investment field. The fluctuating prices in recent years, however, are evidence of the high risk associated with investing in this sector. On behalf of Cologne-based Werte Invest as sponsor and allocator, LIXX has launched the Crypto Cycle Index (ISIN: DE000A3DRKW3), which limits the downside risk generally associated with crypto assets and their corresponding indexes.
The concept to minimise this risk is based on mapping an investor’s potential return in a diversified portfolio of crypto assets and an allocation of US dollars.
This is accomplished by including, weighting and attributing a score value to objective criteria in real market events as part of the index’s monthly rebalancing process.
Accessibility, public price formation with a traceable history and independently verifiable market capitalisation are all used as selection criteria. Each time a rebalancing is performed, the resulting score values are used to determine the new weights.
The market for crypto assets is divided into 14 distinct phases, each of which is identified using the same procedure but a unique set of cross-instrument indications. Bitcoin and Ethereum are effectively components of the index, with their weights and percentages determined by the market phase assigned to them. Additionally, during bull markets in the cryptocurrency market, it is possible to add altcoins after careful consideration.
The bespoke Crypto Cycle Index is characterised by its adaptability and depth of design. Due to the complexity of the index’s setup and calculation, Werte Invest Vermögensverwaltung decided to entrust Düsseldorf-based specialist LIXX with the design and implementation of this index.
The Crypto Cycle Index has shown resilience in the face of the latest turmoil in the cryptocurrency market. The index’s built-in safeguards have allowed it to weather recent market volatility. The index has therefore demonstrated its viability as a prospective investment choice for those seeking a more defensive investing strategy in this unpredictable market environment without entirely sacrificing the prospects presented by the crypto market.