- In 2014, XBX Index, the first Bitcoin index, was launched, and recently, major financial institutions such as ICE, Bloomberg, and SGX are also developing their Bitcoin indices.
- These Bitcoin indices are used in various processes, such as the valuation or the contract & settlement of digital asset financial products such as funds, futures, and options.
- The Grayscale Bitcoin Trust, using the Bitcoin index for the asset valuation, recorded $4.8 billion AUM as of October 5, 2020, which is about 2.5% of the total Bitcoin market cap.
Before the launch of the DeFi indices analyzed by Xangle Signal on September 29, various digital asset indices were already launched and operated to track the digital assets' fair value.
These digital asset indices are calculated by 'Index Administrator' by collecting the price data generated from digital asset exchanges and utilized to evaluate the NAV (Net Asset Value) of the digital asset funds or the contract & settlement process of derivatives based on the digital asset. In most cases, index administrators independently calculate the index value, but in some cases, such as SGX or MV Index Solutions, the process of calculating the index by integrating price data is delegated to 'Calculation Agent'.
Since the XBX Index launch in 2014, various Bitcoin indices have been newly launched by index administrators, and the major financial institutions such as ICE, Bloomberg, and SGX have also developed and operated their indices. In particular, the interface between the digital assets and traditional financial products has widened as two Bitcoin indices were released in 2020, unlike the trend until 2019 that only one Bitcoin index had been launched every year on average.
These Bitcoin indices are used in various financial products such as Grayscale Bitcoin Trust, Bakkt Bitcoin Futures, and Galaxy Bitcoin Fund. As such, various index administrators have developed and operated Bitcoin indices, but among them, ICE Data Indices, an index development subsidiary of ICE, has the most extensive index scope with a total of 58 indices, including the Bitcoin index. Recently, SGX officially launched "Cryptocurrency Indices" in its own index brand, iEdge, on September 1, 2020, showing the most active step among Asian financial institutions for the digital assets. Considering that most Bitcoin indices were developed to support specific digital asset funds or derivatives, the iEdge Bitcoin Index launched by SGX is not yet related to a particular digital asset financial product, but It can be interpreted that Singapore financial authorities start to open up various opportunities for digital asset financial products like North America or Europe.
The largest market cap among digital asset financial products using the Bitcoin indices is Grayscale Bitcoin Trust launched in 2013 by a digital asset management company called Grayscale Investments in the United States. It has recorded $4.8 billion AUM (Asset Under Management) as of October 5, 2020, which represents about 2.5% of the total Bitcoin market cap, and it can be seen that a significant proportion of digital assets are already circulating in the form of traditional financial products. Also, considering that 1) most of the digital asset financial products are distributed in a private placement, so there are many cases where there is no obligation to disclose the detailed AUM, and 2) several hedge funds & VC funds are investing the digital assets directly, it is expected that the market size of the digital assets circulating in the form of traditional financial products will be even larger.