Crypto 10 Index: How to Trade The BITA Crypto 10 Index

In the stock market, indices are widely recognised as financial instruments that track the performance of a group of stocks. However, the concept of indices also extends to the cryptocurrency market as ‘crypto indices’. One example of this is the Crypto 10 index which allows investors and traders to gain exposure to a group of cryptocurrencies or tokens.

In this article, you will learn about the BITA Crypto 10 index, its methodology, how to trade it and various other aspects of the index.

Main Points:

• The BITA Crypto 10 Index, also known as the Crypto10, measures the performance of the top 10 cryptocurrencies by market capitalisation.
• As of June 2024, the Crypto 10 index has a total market capitalisation of 2.01194 trillion USD.
• The price of the Crypto 10 index is derived from a methodology that involves data collection from multiple sources, a market cap limit for diversification, and regular divisor adjustments to maintain accuracy.
• Trading the crypto 10 Index via CFDs offers cost-effectiveness and risk diversification. However, it also carries risks of significant financial losses.

Understanding the Crypto10 Index

The Crypto 10 Index by BITA, also known as the BITA Crypto 10 Index, is a price return performance measure of the top 10 cryptocurrencies by market capitalisation, as listed on reputable crypto exchanges like Kraken, Coinbase, etc. The index is considered a price return index because it only accounts for capital gains and does not include the reinvestment of dividends. As of June 2024, the total market capitalisation of the BITA Crypto 10 index is 2.01194 trillion US dollars.

The History of the Crypto10 Index

The Crypto10 index traces its origins back to December 31, 2016, when it was created and launched with a value of 1,000 by Crypto Finance AG, a financial technology company offering blockchain-related services.

On September 20, 2018, BITA GmbH, a Fintech firm headquartered in Germany, whose specialisation is in enterprise-grade indices and infrastructure, took over the management and responsibilities of the Crypto10 index. The company re-introduced the index as the BITA Crypto 10 Index at a value of 5000 and further expanded the index offering in the investment space.

How Does the BITA Crypto 10 Index Work?

The Crypto10 Index by BITA serves as a performance benchmark for the cryptocurrency market by grouping and weighing together the top 10 cryptocurrencies by free-float market capitalisation. The market cap of each cryptocurrency is calculated by multiplying the number of units of each coin by its current market value in US dollars. Within the Crypto10 index, the appreciation of any of the constituent cryptocurrencies can increase the index’s price. Conversely, if any of the constituent cryptocurrencies depreciates in value, the price of the Crypto10 index can decrease accordingly.

How Is the BITA Crypto 10 Index Calculated?

To ensure accuracy, transparency, and relevance, the value of the BITA Crypto 10 Index is calculated based on a methodology devised by the BITA team. The methodology for calculating the B10 index is as follows:

• Data Collection: BITA, the entity responsible for the Crypto10 index, gathers data on the top 10 cryptocurrencies from multiple reputable sources including trading platforms, regulatory agencies, and token issuers. To represent a significant portion of the cryptocurrency market, BITA considers the top 10 cryptocurrencies based on trading volumes and market capitalisation.


• Market Cap Limit: Based on market capitalisation, no individual token is allowed to make up more than 25% of the total index value. By capping the largest holdings at 25%, BITA ensures greater diversification and prevents any single token from dominating the index's performance.


• Price Calculation: The Crypto10 index is measured in points and denominated in US dollars. To calculate the total market value of the top ten tokens by market capitalisation, the index multiplies the price of each token by its circulating supply. This determines the contribution of each token to the overall index value.


• Divisor Adjustment: BITA uses the Laspeyres formula to create a unique 'Divisor' for the index. The Divisor accounts for changes in the composition and weights of each cryptocurrency within the index. This reflects the accurate value and ensures the continuity of the index.


• Index Updates: Each day, the Crypto10 index is calculated between midnight (00:00 UTC) and 11:00 PM (23:00 UTC). The opening price is usually given at midnight, settlement values at noon ( between 11:50 AM - 12:00 PM UTC), and the closing price (with full details: composition, weights, and individual prices) by the end of the day.


• Rebalancing: To ensure that the index remains relevant and accurate, BITA evaluates changes in the top 10 cryptocurrencies ranking monthly using a 30% selection buffer. This means the cryptocurrencies that drop below the 13th position are replaced by those that have risen to the top 30%.


• Annual Review: While subject to change, the BITA index methodology does undergo an annual review by both the BITA Index Management Board and the Oversight Committee. The annual review is to ensure the index continues to accurately reflect current market conditions and avoids basing its calculations on outdated data.

The BITA Crypto 10 Index Inclusion Criteria

The Crypto10 index has three key requirements for inclusion and these include the following:

1. A coin must be listed on a minimum of two exchanges in order to be eligible for consideration. This is because tokens that are listed on multiple exchanges are considered to have gotten market approval.
2. The coin or token must have been traded for a period of at least 3 months.
3. Finally, the token must have previously ranked among the top 200 in terms of market capitalisation.

The Composition of the Crypto 10 Index

The top 10 cryptocurrencies within the Crypto 10 Index for June 2024, are shown below, ranked by descending order of weighting.

*Please note that the data is subject to change.

How to Trade the BITA Crypto 10 Index CFDs

Crypto10 Index (Crypto10) is the ticker symbol used to represent the CFD derivative of the BITA 10 Index. When you trade contracts for differences (CFDs) on the crypto 10 Index, you agree to settle the difference in the index's price between when you open and close your position. By doing so, you are essentially speculating on the price movement of the index rather than taking ownership of any of the constituent coins. If you open a long position and the Crypto10 index moves upward, you’ll make a profit, but if the price declines, you’ll make a loss – the reverse is the case for a short position.

When trading crypto indices including the Crypto 10 index, crypto index CFDs are far more liquid compared to other index financial products like Exchange Traded Funds (ETFs), Futures, Mutual Funds, etc. However, you should be aware of the significant risks associated with trading CFDs.

Crypto10 Index CFD Trading Hours

The BITA crypto 10 index offers 24/7 availability for traders to gain exposure to its price movement. On the Plus500 platform, Crypto 10 index CFD trading* is available 24 hours a day, seven days a week including weekends (except for 1 hour on Sundays).

*Please note that Plus500’s trading platform hours are subject to change depending on the operator.

The Benefits of Trading the BITA Crypto10 Index CFDs

There are benefits of trading the crypto10 index rather than individual tokens or coins. These benefits include:

Cost-effectiveness: Trading the crypto10 index saves cost by eliminating the fees associated with individual positions on each of the top 10 cryptocurrencies.

Risk Diversification: By design, the crypto10 index distributes your exposure across the top 10 cryptocurrencies. This mitigates the risks associated with holding a single coin.

Liquidity: The top 10 cryptocurrencies are highly liquid assets. Therefore, their liquidity contribution to the index fosters efficient order execution for traders and may also help to reduce the occurrence of slippage.

Lower Volatility: While the crypto market is known for its high volatility, the Crypto10 index may offer lower volatility compared to individual tokens thus making the index less prone to extreme price swings.

Disadvantages of Trading the Crypto10 Index

Some potential drawbacks to trading the crypto10 index include the following:

High Volatility: The Crypto10 index inherits significant volatility from its constituent coins. This raises the risk of significant losses for traders.

Leverage Amplification: Trading the Crypto10 index CFDs offers leverage to potentially magnify returns. However, leverage heightens the risk of substantial financial losses.

Market Movements: Due to the high volatility of the top 10 cryptocurrencies within the index, sudden and unpredictable price swings can lead to unexpected losses.

Risk: Without adequate risk management orders put in place, traders may incur significant financial losses if the market moves unfavourably.

Factors Influencing the Overall Price of the Crypto 10 Index by BITA

When trading the crypto 10 Index, it is important to understand and stay updated with the factors that can impact the price movement of the Crypto10 Index, as detailed below:

Headline Sensitivity: The cryptocurrency market, including the Crypto10 index, is highly sensitive to crypto-related news headlines such as fraudulent charges, crypto mining, trading legislation and institutional involvement in cryptocurrencies. Positive headlines can lead to increased demand and upward price movement, while negative sentiment can result in selling pressure and price dips.

Regulatory News: Changes or announcements regarding regulations from major regulatory agencies like the Securities and Exchange Commission (SEC) in the US and China Securities Regulatory Commission (CSRC) can significantly impact market sentiment and consequently, the BITA10 index's price.

Bitcoin Price Movements: As the leading and dominant cryptocurrency, Bitcoin's price direction often sets the trend for other cryptocurrencies. Therefore, any significant rally or decline in Bitcoin prices can affect the trajectory of the whole digital assets including the performance of the crypto10 index.

Safe Haven Status: Bitcoin is sometimes regarded as a safe haven asset, akin to gold. During periods of economic uncertainty or extreme market volatility, increased demand for Bitcoin as a hedge against traditional assets can drive up its price, and consequently the price of the BITA10 index.

Steps to Buying and Selling BITA Crypto 10 Index CFDs With Plus500

You can follow these steps to start trading the Crypto10 Index CFDs:

1. Open a Trading Account: To begin trading the BITA 10 index CFDs, you need to open an account with a reputable CFD provider offering the index. Plus500 is a popular choice for trading the crypto 10 Index CFDs on either a demo account or a live account.


2. Access the Trading Platform: Get to know the features of the Plus500 platform including advanced charts, technical indicators, economic calendars, sentiment tools etc.


3. Analyse the Market: The tools and features on the Plus500 platform can be helpful for analysing different aspects of the Crypto10 index market movements. This includes performing technical and fundamental analysis to aid your trading decisions.


4. Choose an Order Type: Based on your analysis, decide to buy (long) or sell (short) the Crypto10 index. You can then choose between using market order or pending order.


5. Manage Risk: It is crucial to establish your risk management parameters before confirming an order. This involves defining and inputting your number of contract sizes (position size), stop-loss and take-profit levels.


6. Execute Your Trade: Once you've chosen your order type and set the risk management levels. You can place your buy position if you think the price will rise, or sell position if you think the price will fall.


7. Monitor Your Trade: Decide whether to adjust or close your position by staying informed with news events that might affect the cryptocurrency market as well as monitoring the Crypto10 index price movements.

Why Trade the BITA Crypto 10 Index with Plus500?

• Cutting Edge Trading Platform: Plus500's user-friendly trading platform lets you access Crypto10 Index CFDs seamlessly across desktop, iOS, and Android devices.


• Advanced Trading Tools: The platform provides a valuable suite of tools including charting tools, technical indicators, economic calendars, etc for making comprehensive analyses and informed trading decisions.


• No Ownership or Wallet Required: You can trade the Crypto10 Index CFDs and your favourite cryptocurrency asset on the Plus500 trading platform without needing to manage wallets or own any crypto asset.


• Swift Order Execution: When trading the Crypto10 index CFDs, Plus500 ensures fast and reliable order execution at your precise entry and exit prices.


• Leverage: Plus500 offers leverage up to 2x on crypto assets. But remember, while leverage can magnify potential profits, it also increases potential losses too, so use it wisely.


• Variety of Tradable Assets: Tradable assets on the plus500 platform are not limited to cryptocurrency CFDs. Plus500 also provides access to trade forex pairs, commodities, stocks and various other financial instruments.

Conclusion

The Crypto10 Index by BITA is a tool for investors seeking a snapshot of the entire cryptocurrency market. It acts as a benchmark, offering a quick and clear view of the market's overall strength or weakness. This allows global investors to make informed decisions without analysing individual cryptocurrencies.

However, the benefits extend beyond simple observation. By trading Crypto10 Index CFDs, traders and investors can gain exposure to the price movements of the top 10 cryptocurrencies (by market capitalisation) without owning any of the constituent coins.

Frequently Asked Questions

What Does Circulating Supply Mean?

Circulating supply describes the quantity of cryptocurrency coins or tokens that are accessible to the public and actively traded in the market.

What Are Other Ways to Trade Cryptocurrencies?

Besides crypto indices, popular alternatives for trading and investing in cryptocurrencies are crypto stocks, crypto futures, blockchain-linked ETFs, etc.

What Strategy Can Be Used to Trade Crypto 10 Index?

Different trading strategies can be applied to trading the Crypto 10 Index. Traders may use day trading or swing trading strategies. They can also incorporate moving averages and chart patterns to identify potentially profitable setups.