The Bitwise Crypto Indexes were developed to provide investors with a clear, rules-based, and transparent way to track the value of individual crypto assets and groups of crypto assets. The indexes are designed for benchmarking active strategies, serving as underlying indexes for index-tracking funds, or simply measuring the returns of the market over time.
The crypto market is new and presents many challenges to well-established protocols for indexing traditional assets such as stocks and bonds. The Bitwise Crypto Indexes aim to combine the best of traditional asset indexing methodologies with appropriate adjustments to adapt those practices to the crypto space.
The guiding principles of the Bitwise Crypto Indexes include:
Index and pricing decisions must follow a clear, rules-based, and transparent process.
If the judgment of the Bitwise Crypto Index Committee is required when applying those rules, decisions will be made public with full documentation of the decision-making process.
Indexes are designed in all aspects to be investable and replicable; as such, they will take into account measures surrounding liquidity, capital controls, trading venue stability, custody limitations, and other factors in a rules-based manner.
The Bitwise Crypto Indexes will be governed by the Bitwise Crypto Index Committee with the support of the Bitwise Crypto Index Advisory Board. Individual indexes may have additional support from advisory councils, as designated in this methodology.
Bitwise Crypto Index Committee
Overview: The Bitwise Crypto Index Committee has sole responsibility for developing, maintaining, and adjusting the Bitwise Crypto Index Methodologies, and for verifying the data sources used to calculate those indexes.
Responsibilities: The Committee meets monthly one week prior to the rebalance date (or before) with the following goals:
Review and verify all data sources—existing and proposed—contributing to the Bitwise Crypto Indexes for uptime, accuracy, and robustness
Review and approve new methodologies or changes to existing methodologies to the Bitwise Crypto Indexes
Review and approve all methodological decisions that require judgment, and provide detailed public explanations of those decisions
Handle other matters on an as-needed basis
The indexes rely on the New York Stock Exchange’s public holiday calendar to determine what counts as a “Business Day.”
Voting: Decisions are made by a simple vote of a majority of the members of the Committee present at the meeting. A quorum of two members is required for a meeting to take place.
Committee Members and Bios
Chairman: Matt Hougan
Matt Hougan is Chief Investment Officer for Bitwise Asset Management. He oversees development of the Bitwise index methodologies, conducts fundamental research on crypto assets, and works to educate professional investors on the role crypto assets can play in a portfolio. Prior to joining Bitwise, Hougan was CEO of Inside ETFs and managing director of Global Finance at Informa. Earlier, he was CEO of ETF.com. Hougan is a member of the ETF Hall of Fame, co-author of the CFA Institute’s monograph of ETFs, and co-author of the CFA Institute’s research brief on bitcoin, blockchain and cryptocurrencies.
Member: Hunter Horsley
Hunter Horsley is co-founder and Chief Executive Officer of Bitwise Asset Management. He heads the company’s efforts to be a leader in the crypto asset indexing world. Prior to founding Bitwise, Horsley was a product manager at Facebook, and earlier, a product manager at Instagram.
Member: Hong Kim
Hong Kim is the co-founder and Chief Technology Officer of Bitwise Asset Management. He leads the company’s engineering team and researches technological developments native to crypto protocols. Prior to founding Bitwise, Hong worked as a software security researcher in the South Korean Military.
Bitwise Crypto Index Advisory Board
Overview: The Bitwise Crypto Index Advisory Board (the “Advisory Board”) is composed of leading experts in the fields of traditional asset indexing and crypto assets. The role of the Advisory Board is to provide considered opinions on critical issues facing the Bitwise Crypto Index Committee, and to make recommendations on potential changes to the methodologies surrounding Bitwise’s indexes.
Responsibilities: The Advisory Board meets on an as-needed basis as requested by the Bitwise Crypto Index Committee, addressing specific issues where insight and perspective will be additive to the efforts of the Committee. Advisory Board suggestions are not binding to the Index Committee.
Advisory Board Members and Bios
Member: Spencer Bogart, CFA
Spencer Bogart is a Partner at Blockchain Capital, the general partner of Blockchain Capital’s venture funds. He is a fundamental investment analyst with a rare combination of deep experience analyzing cryptocurrencies as well as traditional equity opportunities. Prior to joining Blockchain Capital, Bogart was a Vice President at Needham & Company, where he authored Wall Street’s first industry report highlighting the use cases, companies, and potential of blockchain technology. Bogart was the most active bitcoin analyst on Wall Street, writing detailed reports and research on bitcoin’s fundamental value proposition, price forecast, and technical advancements.
Member: Srikant Dash, CFA
Srikant Dash is one of the world’s foremost experts on indexing and index construction. He spent 12 years at Standard & Poor’s, where he was Managing Director and Global Head of Research & Design. While at S&P, Dash led the team that created the industry's first smart-beta products based on factors, dividends, and themes. Today over $200 billion in ETF assets track indexes he built. Dash also created the landmark SPIVA (Standard & Poor’s Index vs. Active) report, the primary way active managers are benchmarked to index performance on an industrywide level. He was a long-standing member of the S&P 500 Index Committee. Dash later joined Bloomberg as Global Head of the Index Business, transforming Bloomberg into the largest fixed-income, commodity, and currency index firm in the world. He is also an independent director on the board of subsidiaries of the National Stock Exchange, the largest Indian exchange.
The Bitwise Crypto Indexes are designed to capture the investable market opportunity for crypto assets around the world. This section outlines the rules governing which assets and trading venues contribute to the indexes.
Crypto Asset Trading Venue Eligibility Requirements
Bitwise considers an entity to be an Eligible Crypto Asset Trading Venue if it meets the following criteria:
Provides an open platform for exchanging at least one crypto asset for either another crypto asset or for a fiat currency
This requirement exists to identify the set of institutions to consider for further analysis.
Is not domiciled in a country, region, or locality that implements meaningful capital controls on international investors
This requirement exists to eliminate assets or price inputs from trading venues that are not accessible by international investors. The cryptomarket has seen unusual premiums and/or discounts emerge in markets where meaningful capital controls exist.
Is not subject to extraordinary regulatory or legal action that is likely to lead to unusual pricing, significantly disrupt institutional access to the market, or disrupt fiat withdrawals
This requirement exists to limit trading venues to those that are positive actors in the community, and to limit the potential for interruptions in service or unusual pricing due to government or regulatory enforcement actions.
Charges fees for trading
This provision is designed to exclude trading venues that encourage wash sale trading.
Note that trading venues that engage in “trade mining”—the practice of compensating individuals with a venue-specific coin for trading other coins on that trading venue, as a way of offsetting the cost of executing transactions—are also excluded under this clause.
Has a functioning, secure, and reliable application programming interface (API) allowing for the timely ingestion of trade and volume data
A functioning, secure, and reliable API is required to onboard data from trading venues. In addition, it is a test of the reliability, transparency, and robustness of the trading venue itself.
Has no significant downtime, withdrawal, or known security issues
This requirement exists to protect the index methodology from pricing or asset inclusion distortions that arise at trading venues with significant downtime, withdrawal, or known security issues.
Accounts for more than 1.0% of the combined trailing 30-day dollar trading volume of all crypto assets on entities that meet rules III.A.i.a through III.A.i.f
This requirement exists to ensure that the index captures only robust trading venues where sufficient volume exists to support accurate price discovery. In addition, excluding the long tail of small trading venues eliminates significant engineering and maintenance burdens that would have little to no impact on the resulting price data. The Bitwise Crypto Index Committee reserves the right to add additional trading venues that fall outside of the 1.0% requirement as contributors if it deems those trading venues systemically important.
In the opinion of the Bitwise Crypto Index Committee, has significant real spot trading volume.
The goal of this rule is to select venues that the Bitwise Crypto Index Committee believes have economically meaningful trading volume.
Review of Eligibility and Emergency Removal
Normal Review: The Bitwise Crypto Index Committee will review the list of Eligible Crypto Asset Trading Venues on an annual basis.
Failure to meet any of the Eligibility Requirements speaks to emergent risks to the quality of data coming from a crypto asset trading venue.
Emergency Loss of Eligibility: Under extraordinary circumstances, trading venues may lose eligibility immediately by a unanimous vote of the quorum of members of the Bitwise Crypto Index Committee. The Committee will post meeting minutes of that removal online.
This rule exists to allow the Bitwise Crypto Index Committee to stop Eligible Crypto Asset Trading Venues from contributing prices to its indexes in extraordinary situations where Bitwise has reason to believe the pricing from that venue is not reflective of true price discovery in a given asset.
Crypto Asset Eligibility Requirements
The Bitwise Crypto Indexes draw core constituents from their list of eligible crypto assets, which comprise those items that meet each of the following Eligibility Requirements:
Is a cryptographically secured digital bearer instrument
The Bitwise Crypto Indexes use a broad definition of crypto assets to capture all coins and tokens associated with public blockchains, including those using a variety of different consensus mechanisms.
Has a price that is not pegged to another crypto asset, fiat currency, group of those currencies, or hard asset
The Bitwise Crypto Indexes exclude stablecoins and other pegged assets from consideration, as the indexes are built for investors searching for returns as opposed to stable values. Note: An exception to this rule can be made for indexes deliberately designed to include these assets, but that exception will be clarified in the individual index methodology.
Is freely traded and can be freely held for the foreseeable future
This requirement exists to ensure that assets may be traded and stored in a manner that is acceptable to an institutional investor. It also allows for the removal of assets with known terminations or pending illiquidity, such as those that arise from the announced freezing of a placeholder token at the end of a registration process, among other potential situations.
Trades on an Eligible Crypto Asset Trading Venue without withdrawal issues specific to that crypto asset
This requirement exists to ensure robustness in the trading venue ecosystem supporting any given crypto asset. It guarantees that at least two trading venues support a given asset and that the second (third, fourth, etc.) trading venue(s) is (are) sufficiently robust to maintain smooth trading in the event of a failure at any single trading venue. Note: This rule takes into account withdrawal issues on an asset-by-asset basis at each trading venue.
Is custodied by a third-party custodian regulated as a federally chartered bank or as a state trust company, and meets additional security practices, insurance requirements and business practice requirements as determined by the Bitwise Crypto Index Committee.
The list of custodians meeting the criteria above is reviewed on an annual basis, or at the discretion of the Bitwise Crypto Index Committee. As of January 25, 2023, the list of custodians was:
Fidelity Digital Assets
This rule exists to ensure that assets can be custodied in a manner that, in the view of the Bitwise Crypto Index Committee, would align with the goals of professional investors in the U.S. and meets the operational requirements of a crypto asset fund.
Has no known security vulnerabilities, including critical bugs, undue exposure to 51% attacks, or other factors, as determined by the Bitwise Crypto Index Committee
This requirement exists to ensure the asset is not knowingly exposed to a critical security risk that could lead to a significant loss in value.
Does not face undue risk of being in violation of U.S. federal securities laws in the opinion of the Bitwise Crypto Index Committee, given present knowable facts and circumstances.
Has traded more than 1% of its free-float-adjusted market capitalization on Eligible Crypto Asset Trading Venues over the past 30 days.
This requirement exists to ensure the crypto assets included in the index are sufficiently liquid to facilitate easy investment and withdrawals.
Has maintained a unit price greater than $0.01 for the past 30 consecutive days.
This rule is designed to ensure that assets included in Bitwise indexes have robust price discovery in place.
Loss of Eligibility and Exceptions
Normal Loss of Eligibility: Assets will lose eligibility and be removed from all indexes at the next regular reconstitution event if they violate any of the listed Eligibility Requirements for 30-consecutive days.
Failure to meet any of the Eligibility Requirements for individual crypto assets speaks to emergent risks surrounding that asset. The 30-consecutive-day provision avoids unnecessary churn caused by individual-day point failures.
Emergency Loss of Eligibility: Under extraordinary circumstances, assets may lose eligibility and be removed on a same-day basis by a unanimous vote of the quorum of members of the Bitwise Crypto Index Committee. Such emergency removals will take place at 4:00 p.m. ET following the conclusion of the meeting and public posting of that notice on our website.
This rule exists to allow the Bitwise Crypto Index Committee to act quickly in the event of truly extraordinary circumstances, including major security breaches, regulatory action, or identified fraud that imperils the value of an eligible crypto asset.
Hard Forks Exemption: Hard Forks are granted a 45-day exemption to rule III.B.i.d.
Hard forks are new crypto assets that are granted to holders of existing crypto assets when portions of the consensus nodes adopt different policies. In the event of a hard fork, holders of an existing crypto asset end up with ownership of both the original crypto asset and the new, hard-forked crypto asset. These hard-fork assets can be significant in size and importance in the marketplace.
To reduce unnecessary turnover in the indexes, hard forks are given a 45-day exemption to the volume-related portions of the Core Eligibility Requirements, so that they are not reflexively removed from indexes due to their “newness.”
Use of Restricted Or Alternative Weightings of Eligible Crypto Asset Subsets for Calculating Indexes
The Bitwise Crypto Index Committee may elect to create new indexes, or variations on existing indexes, using defined subsets of the complete list of all the eligible crypto assets and/or alternative weighting schemes. For example, an index could be constructed that restricts the maximum percentage of eligible crypto assets, or that makes use of alternative trading volume or market-capitalization minimums, or any other factor that the Committee may elect to use. Any indexes using subsets of all eligible crypto assets will be clearly labeled as such.
The Bitwise Crypto Indexes are designed to capture the investable market opportunity for crypto assets around the world. This section outlines how Bitwise Index Services identifies the accurate price and market capitalization of crypto assets, and how it handles network distributions including hard forks, airdrops, and emissions.
Crypto Asset Prices
Bitwise Crypto Indexes use the Lukka Prime Intraday price for all crypto assets.
Definition, Pricing, and Treatment of Network Distributions
Holders of crypto assets occasionally receive distributions from a variety of sources.
Hard forks are new crypto assets that are granted to holders of existing crypto assets when portions of the consensus nodes adopt different policies. When a significant hard fork occurs, the Bitwise Crypto Index Committee will determine which asset will count as the continuing asset and which asset will be the new "hard fork asset." The Committee will rely on a variety of factors when making this calculation, including the relative market capitalization of each asset.
The act of claiming a hard fork requires agency on the part of crypto asset holders and also introduces risk. As such, the Bitwise Crypto Indexes do not incorporate the value of forked assets into index values. It is our expectation that fund managers tracking Bitwise Crypto Indexes may well take action to idiosyncratically claim hard fork assets, and that the value of those rewards will return to those funds as excess returns.
Some crypto assets provide regular awards to holders in the form of crypto asset grants, often in the form of “gas” that powers transactions on the network itself. These regular awards are referred to as “emissions.” Emissions are native developments for certain crypto assets. To date, however, the daily value of distributed emissions has been de minimis for any given crypto asset.
Given the small values involved, it would not be practical for investment funds handling regular inflows and outflows to accurately track Bitwise Crypto Indexes if they accrued emissions on a daily basis, whether they hoarded those emissions over time or liquidated them daily. As a result, the Bitwise Crypto Indexes ignore emissions for index calculation purposes. It is our expectation that funds tracking our indexes may accrue emissions and periodically liquidate them to deliver excess returns to shareholders.
An airdrop occurs when a new or emergent crypto asset is granted to holders of an existing crypto asset on a one-off or occasional basis.
Airdrops are not native to the internal return drivers of any given crypto asset. Importantly, they also require agency on the part of crypto asset holders to claim, and the act of claiming those assets can potentially put holders of a given crypto asset at risk. As such, the Bitwise Crypto Indexes do not incorporate their value into its indexes. It is our expectation that fund managers tracking Bitwise Crypto Indexes may well take action to idiosyncratically claim valuable airdrops, and that the value of those airdrops will return to those funds as excess returns.
A staking reward is granted to holders of a crypto asset when they lock up that asset as collateral to secure fairness when validating transactions or other network actions.
Staking rewards require agency on the part of crypto asset holders and also introduce liquidity restrictions since the act of staking locks up coins for a period of time. As such, the Bitwise Crypto Indexes do not incorporate the value of staking rewards into its indexes. It is our expectation that fund managers tracking Bitwise Crypto Indexes may well take action to idiosyncratically claim staking rewards, and that the value of those rewards will return to those funds as excess returns.
The Bitwise Crypto Indexes aim to capture the importance of each crypto asset in the ecosystem, as measured by the aggregate value investors assign to that asset. To do so, Bitwise must calculate the market capitalization of each crypto asset. It does this by multiplying the Lukka Prime Intraday price by the free-float-adjusted issuance of a given crypto asset. This section explains how those adjustments are made.
It is common practice in equity indexes to remove any noncirculating shares from market-cap calculations. These include, for instance, shares in a company that are held by governments and are likely to never trade on the public market.
Adjusting crypto assets for free float is necessary as well. Coins may launch with a large stated and potential issuance, but a significant portion of that supply may be held outside of the liquid market. For the purposes of its market-cap-weighted indexes, Bitwise will remove from consideration:
All coins that remain in the control of developers, principals, foundations, or business entities affiliated with the creation of the crypto asset.
All coins that are publicly known to be lost or burned.
Other portions of supply that are deemed illiquid by the Bitwise Crypto Index Committee.
Free-float adjustments are determined on a monthly basis at 4 p.m. Eastern Time one week prior to the rebalance date, and are set until the following month and actioned upon the next index reconstitution.
The Bitwise Crypto Indexes are designed to be the leading investable benchmarks in the cryptomarket. This section outlines certain rules regarding the maintenance and distribution of those indexes.
Total Return Index
All Bitwise Crypto Indexes are Total Return indexes, incorporating the value of certain Network Distributions pursuant to the rules outlined in this Methodology.
Available Level Types
All Bitwise Crypto Indexes are available in two different levels, published at the following times, unless otherwise disclaimed at the specific index level.
Daily Index Level: The Bitwise Crypto Indexes have one official daily level that is produced at 4 p.m. Eastern Time. This level incorporates all eligible Network Distributions that occur prior to this time.
This daily index level is distributed each day by 5 p.m. Eastern Time, unless data or other issues preclude or delay the publication of an accurate price. In that event, Bitwise will distribute the daily index level as soon as reasonably possible.
Hourly Levels: The Bitwise Crypto Indexes have Hourly Levels produced each hour of the day. This level does not incorporate the value of network distributions that occur between publications of the Daily Index Level.
The Hourly Level should be considered an estimated level. Bitwise will make no attempt to correct or amend the Hourly Level to adjust for network distributions or data corrections that occur, but rather, will amend current Real-Time Levels to reflect that information on a once-a-day basis following the publication of the Daily Index Level.
Crypto is a fast-moving marketplace. To ensure its indexes stay up-to-speed with changes in the crypto ecosystem, the Bitwise Crypto Indexes use specific guidelines around reconstitution events.
Reconstitution Timing and Frequency: Unless otherwise disclaimed at the specific index level, the Bitwise Crypto Indexes are reconstituted monthly at 4 p.m. Eastern Time on the last Business Day of the month. The indexes have a “record date” on which the new assets entering the index are determined as of 4 p.m. Eastern Time one week prior to the rebalance date.
The selection of 4:00 p.m. Eastern Time on the last Business Day of the month is intended to ensure the indexes are reconstituted at a time of normal trading liquidity.
Buffer Zones: All Bitwise Crypto Indexes that use market-capitalization guidelines to drive inclusion decisions have a “10% market-capitalization buffering rule” to limit unnecessary turnover. An Eligible Crypto Asset held in a Bitwise Crypto Index will only be removed if there is an asset eligible for the index that exceeds the current asset’s free-float market capitalization by 10% as of 4 p.m. Eastern Time on each of the five-consecutive days up to and including one week prior to the rebalance date.
Buffer Zones are common practice in traditional asset indexing, and are used as tools to reduce noneconomic switching of assets due to inconsequential or fleeting differences in market capitalization.
The Bitwise Crypto Indexes methodology governs a number of different index series, each of which has its own additional rule-sets and specifics. This section outlines the indexes that are currently available and the unique rule-sets that apply to each series.
The Bitwise Crypto Market-Capitalization Indexes
The Bitwise Crypto Market-Capitalization Indexes aim to capture the returns of leading cryptocurrencies grouped by free-float-adjusted market capitalization.
The following Bitwise Crypto Market-Capitalization Indexes are available and have the itemized rule exceptions listed below:
Bitwise 10 Large Cap Crypto Index (BITX): The Bitwise 10 Large Cap Crypto Index captures the 10 largest eligible crypto assets by free-float-adjusted market capitalization.
The base date for the index, using backtested data, is January 1, 2017. The base level was 964. This level was chosen because it was the price of bitcoin in U.S. dollars at midnight UTC on that day. The inception date for live data on the Bitwise 10 Large Cap Crypto Index is October 1, 2017.
Bitwise 10 ex Bitcoin Large Cap Crypto Index: The Bitwise 10 ex Bitcoin Large Cap Crypto Index captures the assets in the Bitwise 10 Large Cap Crypto Index, excluding bitcoin. The index does not replace bitcoin with a tenth asset, but rather, at times when bitcoin is a constituent of the Bitwise 10 Large Cap Crypto Index, captures nine assets.
The base date for the Bitwise 10 ex Bitcoin Large Cap Crypto Index is July 30, 2021. The index’s base level was set at 45,807.91 at 4pm ET. This level was chosen because it was the level of the Bitwise 10 Large Cap Crypto Index at that time. The Inception date for the index is the same as the base date.
The Bitwise Decentralized Finance Crypto Index
The Bitwise Decentralized Finance Crypto Index is designed to provide investors with a clear, rules-based, and transparent way to track the value of the rapidly emerging Decentralized Finance space.
The index has the following exceptions and additions to the Bitwise Crypto Index Methodology:
Overview: The Bitwise Decentralized Finance Crypto Index Council (the “Advisory Council”) is composed of leading experts in the decentralized finance space. The role of the Advisory Council is to provide considered opinions on critical issues facing the Bitwise Crypto Index Committee that are related to the Bitwise Decentralized Finance Crypto Index, and to make recommendations on potential changes to the methodology.
Responsibilities: The Advisory Council is consulted on an as-needed basis as requested by the Bitwise Crypto Index Committee, addressing specific issues where insight and perspective will be additive to the efforts of the Committee. The Advisory Council does not control the index, and recommendations or views given by Advisory Council members are not binding to the Index Committee.
Advisor Board Members and Bios:
Member: Michael Anderson, Framework Ventures
Michael Anderson is a co-founder and partner at Framework Ventures, a thesis-driven venture capital firm that builds alongside its founders. The firm partners with founders and teams to build token-based networks and develop the requisite cryptoeconomics, governance, and community to scale. Prior to founding Framework, Michael was co-founder of Hashletes, the first and only NFLPA-licensed digital collectibles market. His earlier career bridged consumer technology and finance, with positions at Snap, Inc., Dropbox, and Barclays Capital.
Member: Ben Forman, ParaFi Capital
Ben Forman is the founder and managing partner of ParaFi Capital, an alternative investment firm focused on blockchain and decentralized finance markets. ParaFi Capital takes a unique multidisciplinary approach to identifying untapped opportunities through a research intensive, long-term focused investment framework. The firm invests in digital assets that address tangible use cases, demonstrate signs of product-market fit, and exhibit compelling cryptoeconomic models. Before founding ParaFi, Ben was a director at KKR, and earlier, vice president at TPG.
Member: Avichal Garg, Electric Capital
Avichal Garg is a co-founder and partner on the investment team at Electric Capital. He is a successful serial entrepreneur with executive experience at Google and Facebook, which acquired his previous company in 2012. At Facebook he was Director of Product Management for the Local product group, a team of 400 engineers responsible for $3.5B in revenue. Avichal is also a successful venture investor and was a part-time partner at YCombinator.
Member: Aleks Larsen, Blockchain Capital
Aleks Larsen is a Senior Associate at Blockchain Capital, where he focuses, in part, on DeFi. With a multidisciplinary background, Aleks brings a unique combination of experience in systems engineering, fundamental analysis and capital markets to the firm. Prior to joining Blockchain Capital, Aleks worked as an investment banking analyst at Guggenheim Partners, focusing on mergers & acquisitions and equity financings within the biotechnology sector.
Member: Scott Lewis, DeFi Pulse
Scott Lewis is the founder of DeFi Pulse, the leading site for analytics and rankings of DeFi protocols. Scott is also co-founder of Concourse Open Community, an open community of builders, enthusiasts and researchers working towards a bountiful and decentralized future. He is also principal at Flatbush Capital. He was previously a trader at Integral Derivatives and Susquehanna International Group.
Crypto Asset Eligibility
Decentralized Finance Categorization
In order to be eligible for the Bitwise Decentralized Finance Crypto Index, a crypto asset must be the native asset of a blockchain-enabled application that uses smart contracts to execute decentralized financial services. Decentralized finance applications are those that, in the opinion of the Bitwise Crypto Index Committee, compete with one or more of the major business lines operated by a constituent of a leading Financial Services index.
The Bitwise Crypto Index Committee may consider additional factors specific to the security of decentralized finance systems and their susceptibility to critical exploits in determining the eligibility of individual crypto assets. These exploits can be either technical (an error in the software code) or economic (an unintended use of the smart contract) in nature. Considerations may include but are not limited to the availability of security audits from reputable providers, the availability of formal verification from reputable providers, “seasoning” (or how long a decentralized finance service has been live in production), any history of exploits, the response of the development community to any exploits, and the advice of Advisory Council members.
Usage, Development, Supply Curve, Ownership, And Other Considerations
The Bitwise Crypto Index Committee may consider additional factors specific to the decentralized finance market in determining the eligibility of individual crypto assets. These factors may include but are not limited to supply issuance curves and cliffs, distribution of token ownership, usage and the potential for usage of the service, total value locked, developer activity, reputations of key contributors, evidence of community, and the advice of Advisory Council members, among other factors.
The Bitwise Decentralized Finance Crypto Index
The Bitwise Decentralized Finance Crypto Index will consist of the ten largest crypto assets that satisfy the index’s Eligibility Requirements, or a smaller number if fewer than ten constituents meet the Eligibility Requirements
Inception Date and Base Level
The Bitwise Crypto Equal Weight Indexes
The Bitwise Crypto Equal Weight Indexes aim to capture the returns of institutionally accessible crypto assets using an equal-weighting methodology.
The following Bitwise Crypto Equal Weight Indexes are available:
Bitwise BTC/ETH Equal Weight Crypto Index: The Bitwise BTC/ETH Equal Weight Crypto Index captures the value of an equal-weighted index consisting of bitcoin and ether.
Asset Pricing Methodology: The Bitwise Crypto Equal Weight Indexes use the Coin Metrics Hourly Reference Rates when pricing crypto assets, including in market capitalization calculations.
Rebalance Timing and Frequency: The Bitwise Crypto Equal Weight Indexes are rebalanced quarterly at 4 p.m. Eastern Time on the last Business Day of each quarter (March, June, September, December).
Inception Date and Base Level: The base and inception date for the Bitwise BTC/ETH Equal Weight Crypto Index is April 18, 2022. The index uses a base level of 1,000 as of 4:00 p.m. ET on the inception date.
Bitwise Partnership Indexes
Bitwise develops certain indexes to support partnerships with leading third-party asset managers around the world. Each index has specific rules and exclusions designed for different markets, regulatory regimes and investor categories.
The Bitwise Select 10 Large Cap Crypto Index (BITS10)
The Bitwise Select 10 Large Cap Crypto Index aims to capture the returns of up to the 10 leading cryptocurrencies, as measured by free-float market capitalization, subject to certain exclusions and conditions.
Exclusions and Conditions
Privacy Coins: “Privacy coins” are crypto assets that incorporate features designed to make the records of transactions anonymous (as opposed to pseudonymous or fully public).
Platform Dependent Tokens: “Platform Dependent Tokens” are crypto assets that are issued on a separate, third-party blockchain; the most common example are ERC-20 tokens.
Conditions: In addition to the core Eligibility Criteria laid out in III.B.i, crypto assets must be accepted by the Swiss Stock Exchange (SIX) as an underlying, supported for trading by Authorised Participants expressly named as an Authorised Participant on the Issuer’s website or in the Final Terms for the relevant series of products, and be available to custody at the following select, third-party custodians:
Base Date and Base Level: The base date for the Bitwise Select 10 Large Cap Crypto Index, using backtested data, is January 1, 2017. The index uses a base level of 964. This level was chosen because it was the price of bitcoin in U.S. dollars at midnight UTC on that day. The inception date for live data on the Bitwise Select 10 Large Cap Crypto Index is May 17, 2019. All data before this inception date is backtested data.
Daily Index Level: The index value is struck once per day at 5:00 p.m. Zurich Local Time.
Reconstitution Timing: The index reconstitution is set at 5:00 p.m. Zurich Local Time one week prior to the last Swiss Business Day of the month, and actioned at 5:00 p.m. Zurich Local Time on the last Swiss Business Day of the month.
Swiss Business Day: The index relies on the SIX Swiss Exchange’s “Trading Calendar” to determine what counts as a “Swiss Business Day.”
Emergency Loss of Eligibility for Crypto Assets: In the event that the Bitwise Crypto Index Committee determines that an asset must be removed from the index on an emergency basis, such removal will take place at 5pm Zurich Local Time following that decision.