Crypto indexes offer broad access, but are they profitable in the long run?

The cryptocurrency market is known for its high volatility and the wild-west nature of the space is, in part, due to many of the assets having small market caps and the 24/7 operational hours of centralized and decentralized exchanges (DEXs).

In addition to being high risk, crypto trading can also be a very time-intensive process. It can be an overwhelming task and a barrier to entry for most investors in determining which tokens to invest in.

For these investors, index investing could be a profitable alternative for gaining exposure to some of the hottest sectors of the cryptocurrency market.

Here’s a look at how crypto index products compare to individual tokens and which strategies have produced the biggest return.

Index Cooperative

Index Cooperative (INDEX) is a decentralized autonomous asset manager that allows investors to create a custom index of tokens using smart contracts.

Several of the most actively traded indexes originated from Index Coop, including the DeFi Pulse Index (DPI), Metaverse Index (MVI), Data Economy Index (DATA) and Bankless DeFi Innovation Index (GMI).

Plotting the price of these indexes against the total market capitalization of the cryptocurrency market can help provide insight into how each one performed compared to the market as a whole.

DPI/USDT vs. MVI/ETH vs. Total crypto market capitalization. Source: TradingView

Since May 29, 2021, which is when data first became available for DPI and MVI on TradingView, the weakness of the decentralized finance (DeFi) sector can be seen in the poor performance of DPI, which is currently down more than 50% while the total market cap has risen 19.82%.

During that same period of time, the Metaverse index has increased 103% when compared to the price of Ether (ETH), and the gains are even greater when looking at its value in terms of USD.

MVI/USD 1-day chart. Source: CoinGecko

As seen on the chart above, the price of MVI has increased from $42.02 on May 29 to its current value of $118.06, reflecting a gain of 180% compared to the 20% rise in the total market cap.

Metaverse and nonfungible token (NFT)-related projects have been a bright spot in an…



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