Guiding Principles and Indexing Approach
    Governance
    Bitwise Crypto Index Committee
    Bitwise Crypto Index Advisory Board
    Eligibility Requirements
    Crypto Asset Trading Venue Eligibility Requirements
    Crypto Asset Eligibility Requirements
    Asset Pricing Methodology
    Bitwise Crypto Asset Price
    Definition, Pricing, and Treatment of Network Distributions
    Market Capitalization Methodology
    Free-Float Adjustment
    Index Maintenance, Rules, and Distribution
    Available Indexes
    Available Level Types
    Reconstitution Guidelines
    Index Series Specifics
    The Bitwise Crypto Market-Capitalization Indexes
    The Bitwise Decentralized Finance Crypto Index
    The Bitwise Crypto Equal Weight Indexes
    Bitwise Partnership Indexes
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Bitwise Crypto Asset Index Methodology
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Bitwise Crypto Asset Index Methodology
Last updated January 10, 2023
Eligible Crypto Assets
Eligible Crypto Assets
Crypto assets must meet stringent criteria prior to inclusion in our indexes.
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Index Committee
Index Committee
The Bitwise Crypto Indexes are supported and maintained by industry experts.
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Eligible Exchanges
Eligible Exchanges
Crypto asset exchanges must meet certain criteria to be included in index methodology.
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Investable Indexes
Investable Indexes
The Bitwise Crypto Indexes include large cap, mid cap, small cap and total market indexes.
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  1. Guiding Principles and Indexing Approach

    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.


  2. Governance

    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.

    1. Bitwise Crypto Index Committee

      1. 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.

      2. Responsibilities: The Committee meets monthly on the third-to-last Business Day of the month 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.”

      3. 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.

      4. Committee Members and Bios

        1. 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.

        2. 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.

        3. 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.

    2. Bitwise Crypto Index Advisory Board

      1. 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.

      2. 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.

      3. Advisory Board Members and Bios

        1. 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.

        2. 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.


  3. Eligibility Requirements

    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.

    1. Crypto Asset Trading Venue Eligibility Requirements

      1. Eligibility Requirements

        Bitwise considers an entity to be an Eligible Crypto Asset Trading Venue if it meets the following criteria:

        1. 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.

        2. 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.

        3. Is in compliance with local regulations and not subject to extraordinary regulatory or legal action

          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.

        4. 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.

        5. 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.

        6. 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.

        7. Accounts for more than 0.1% 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 0.1% requirement as contributors if it deems those trading venues systemically important.

        8. 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.

      2. Review of Eligibility and Emergency Removal

        1. 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 venues.

        2. 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.

      3. Use of Eligible Crypto Asset Trading Venue Subsets for Calculating New Indexes or Index Variants

        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 Eligible Crypto Asset Trading Venues. For example, an index could be constructed that restricts its pricing inputs from Eligible Crypto Asset Trading Venues selected on the basis of legal domicile of the trading venue, or specific regulatory status of the trading venue, or alternative trading volume minimums, or any other factor that the Committee may elect to use. Any indexes using subsets of the Eligible Crypto Asset Trading Venue will be clearly labeled as such.

    2. 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:

      1. Eligibility Requirements

        1. 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.

        2. 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.

        3. 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.

        4. Trades on two or more Eligible Crypto Asset Trading Venues, 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.

        5. 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, 2021, the list of custodians was:

          • Anchorage

          • Bakkt Warehouse

          • BitGo

          • Coinbase Custody

          • Fidelity Digital Assets

          • Gemini Custody

          This rule exists to ensure that assets can be custodied in a manner that, in the view of the Bitwise Decentralized Finance 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.

        6. 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.

        7. 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.

        8. Has traded more than 10% 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.

        9. 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.

      2. Loss of Eligibility and Exceptions

        1. 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.

        2. 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.

        3. 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.”

      3. 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.


  4. Asset Pricing Methodology

    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.

    1. Bitwise Crypto Asset Price

      The Bitwise Crypto Indexes intend to reflect the price at which an institutionally oriented investor can trade any given crypto asset. This price is called the Bitwise Crypto Asset Price (CAP), and is used in calculating Bitwise index values (except in the case of certain network distributions, as described in IV.B). The default denomination of a CAP is the U.S. dollar, and the methodology is as follows:

      1. Calculating Crypto Asset Prices In U.S. Dollars

        The crypto asset world has two modalities of trading: crypto-to-fiat trading and crypto-to-crypto trading. To create a single unified price for every crypto asset, all trading pairs must be standardized to price that asset in a single currency (for the Bitwise Crypto Indexes, this currency is the U.S. dollar). The steps to do that are listed below in the order that they are followed:

        1. Select Quote Crypto Assets: ​To avoid circular pricing when standardizing crypto-to-crypto trading pairs, Bitwise must select a group of “Quote Crypto Assets.” Quote Crypto Assets are determined on an annual basis at the Index Committee meeting that precedes the start of a new calendar year.

          Quote Crypto Assets are those that:

          1. Have crypto-to-fiat trading on at least two Eligible Crypto Asset Trading Venues that allow for institutional deposits and withdrawals in a noncapital-controlled fiat currency (henceforth called an Eligible Fiat Currency).

            This rule exists to ensure institutional investors can sell Quote Crypto Assets for an eligible fiat currency and withdraw funds. The rule requires two Eligible Crypto Asset Trading Venues for reasons of robustness and to show independent adoption of the crypto asset.

          2. Are the largest crypto trading pair (measured by trailing 30-day dollar trading volume) for at least one of the top 100 Eligible Crypto Asset in each of the past three months.

            This requirement exists to ensure that Quote Crypto Assets have strong price discovery and are critical to the ecosystem. Focusing on the top trading pair of a top 100 currency ensures that each Quote Currency is systemically important for investors, while the three-month requirement ensures it has staying power within the community.

          As of December 31, 2020, Quote Crypto Assets were:

          • Bitcoin (BTC)

          • Ethereum (ETH)

          Under extraordinary circumstances, Quote Crypto Assets may be removed from consideration 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.

        2. Calculate Quote Crypto Assets CAPs: Quote Crypto Assets are unique in that the Bitwise Crypto Indexes only consider fiat-to-crypto trades when calculating their CAPs, as the goal is to calculate the fiat-convertible price of Eligible Crypto Assets that have crypto-to-crypto trading pairs.

          The CAP for a Quote Crypto Asset is calculated as follows:

          1. Aggregate all crypto-to-fiat trading pairs for Eligible Fiat Currencies that take place on Eligible Crypto Asset Trading Venues, removing any pairs that face withdrawal issues.

          2. Transform all non-U.S.-dollar fiat trading pairs into U.S. dollar prices using synchronous data from an established FX reference data provider.

          3. Calculate the U.S. dollar volume over the previous hour for each crypto-to-fiat trading pair.

          4. Assign each trading pair a contribution weight based on its share of total dollar trading volume in a given asset over the previous hour.

          5. Multiply the last traded price (adjusted into U.S. dollars) for each trading venue pair by its contribution weight. In the event that no trading price is pulled for a particular trading pair either due to technical reasons or to a lack of trading volume, the Bitwise Crypto Index Committee may substitute a fair market value estimate for that price or eliminate that price from consideration.

          6. Sum to find the CAP.

        3. Calculate the CAP for Non-Quote Crypto Assets: ​Many crypto assets trade (sometimes exclusively) in pairs with other crypto assets. The process for translating these crypto-to-crypto pairs along with crypto-to-fiat pairs into an aggregate CAP is as follows:

          1. Consider both crypto-to-fiat trading pairs and crypto-to-crypto trading pairs on Eligible Crypto Asset Trading Venues, excluding any trading venue pairs that have withdrawal issues.

          2. Exclude all trading pairs that are not denominated in either Eligible Fiat Currencies or Quote Crypto Assets.

          3. Transform all non-U.S.-dollar fiat trading pairs into U.S. dollars using synchronous FX data from an established FX data supplier.

          4. Use the synchronous CAP for the relevant Quote Crypto Assets to translate crypto-to-crypto pairs into a crypto-to-U.S.-dollar equivalent.

          5. Calculate the U.S. dollar volume for each trading pair and assign each pair a contribution weight based on its share of total U.S. dollar trading volume in a given crypto asset over the past hour.

          6. Multiply the last traded price (adjusted into U.S. dollars) by its contribution weight. Note: In the event that no trading price is pulled for a particular trading pair either due to technical reasons or a lack of trading volume, the Bitwise Crypto Index Committee may substitute a fair market value estimate for that price or eliminate that price from consideration.

          7. Sum to find the CAP.

      2. Temporary Loss Of Multiple Trading Venue Pricing Availability

        In the event that one or more of the trading venues contributing to a CAP is found ineligible for any reason, and as a result an Eligible Crypto Asset trades on fewer than two Eligible Crypto Asset Trading Venues for a time period, the Bitwise Crypto Index Committee reserves the right to assign a daily fair value estimate to that asset until such time a CAP can be restored. The fair value process will attempt to incorporate all available pricing resources, considering the validity of those sources and taking into account liquidity concerns and other issues.

        Crypto Asset must trade on at least two Eligible Crypto Asset Trading Venues to receive a CAP and be eligible to enter a Bitwise Crypto Index. It is possible, however, for one or more of those trading venues to lose eligibility, leaving the asset with one (or even zero) Eligible Crypto Asset Trading Venues contributing live pricing data. This rule allows for Bitwise Index Services to price those assets during the 30-day grace period that Eligible Crypto Assets have to cure a trading venue related eligibility violation under rule III.B.ii.a.

    2. Definition, Pricing, and Treatment of Network Distributions

      Holders of crypto assets occasionally receive distributions from a variety of sources.

      1. Hard Forks

        1. Definition

          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 hard fork occurs, the Bitwise Crypto Indexes consider the asset with the larger post-fork, free-float-adjusted market capitalization to be the original coin, and the asset with smaller post-fork, free-float-adjusted market capitalization to be a new asset.

        2. Pricing

          There is often a multiple-day delay between the moment a hard fork technically occurs and the time when Eligible Crypto Asset Trading Venues enable deposits and withdrawals for both of the forked coins. During this interregnum, Eligible Crypto Asset Trading Venues often provide pricing for both forked coins on their trading venue by allowing users to trade both coins within the confines of that trading venue.

          In these situations, Bitwise Crypto Indexes will treat the crypto asset as an aggregate asset from a pricing perspective, holding both parts of the forked coin and aggregating their value into a single unit. This situation will persist until 4 p.m. Eastern Time on the first day that two or more Eligible Crypto Asset Trading Venues enable deposits and withdrawals for both of the coins. At that point, Bitwise will recognize the newly forked coin as a separate coin, and apply standard CAP pricing techniques to both assets.

          In extraordinary situations, the Bitwise Crypto Index Committee reserves the right to make a fair-value estimate of the value of the forked coins. The fair-value process will attempt to incorporate all available pricing resources, considering the validity of those sources and taking into account liquidity concerns, adoption risks, and other issues.

        3. Treatment

          The Bitwise Crypto Index Committee will evaluate the newly forked coin once a CAP exists to determine which of the following scenarios its treatment should fall into:

          1. If the newly forked coin has a free-float-adjusted market cap large enough to satisfy the inclusion criteria of a given index, and it satisfies the other eligibility requirements laid out in section III.B, it is retained by the index until the next reconstitution.

          2. If the newly forked coin has a free-float-adjusted market cap that is greater than 0.05% of the index but is not large enough to qualify for continued inclusion in the index, or fails other eligibility requirements laid out in section III.B, it is liquidated at 4 p.m. ET on the first day it has a CAP. The proceeds from this liquidation are invested on a pro-rata basis in the other crypto assets in the index.

          3. If a newly forked coin has a free-float-adjusted market cap that is less than 0.05% of the overall index value, it is ignored, as a way of limiting operational overhead.

      2. Emissions

        ​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.

      3. Airdrops

        ​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.

      4. Staking Rewards

        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.


  5. Market Capitalization Methodology

    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 CAP by the free-float-adjusted issuance of a given crypto asset. This section explains how those adjustments are made.

    1. Free-Float Adjustment

      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:

      1. All coins that remain in the control of developers, principals, foundations, or business entities affiliated with the creation of the crypto asset.

      2. All coins that are publicly known to be lost or burned.

      3. 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 on the third-to-last Business Day of the month, and are set until the following month and actioned upon the next index reconstitution.


  6. Index Maintenance, Rules, and Distribution

    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.

    1. Available Indexes

      1. 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.

    2. 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.

      1. 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.

      2. 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.

    3. Reconstitution Guidelines

      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.

      1. 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 of 4 p.m. Eastern Time on the third-to-last Business Day of the month.

        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.

      2. 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 the third-last Business Day of the month.

        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.


  7. Index Series Specifics

    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.

    1. 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.

      1. Available Indexes

        The following Bitwise Crypto Market-Capitalization Indexes are available and have the itemized rule exceptions listed below:

        1. 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.

        2. Bitwise 20 Mid Cap Crypto Index (BITW20): The Bitwise 20 Mid Cap Crypto Index captures eligible crypto assets ranked 11-30 by free-float-adjusted market capitalization.

          1. Exception: The Bitwise 20 Mid Cap Crypto Index does not apply rules III.B.i.d, III.B.i.e, III.B.i.f, and III.B.i.g. This means this index can consider crypto assets that trade on only one Eligible Crypto Asset Trading Venue, do not have institutional custody asset support, or face greater regulatory or technical risk compared to Bitwise 10 Large Cap Crypto Index constituents. These exceptions are necessary given the focus of the index to represent the broader crypto market.

        3. Bitwise 70 Small Cap Crypto Index (BITW70) The Bitwise 70 Small Cap Crypto Index captures eligible crypto assets ranked 31-100 by free-float-adjusted market capitalization.

          1. Exception: The Bitwise 70 Mid Cap Crypto Index does not apply rules III.B.i.d, III.B.i.e, III.B.i.f, and III.B.i.g. This means this index can consider crypto assets that trade on only one Eligible Crypto Asset Trading Venue, do not have institutional custody asset support, or face greater regulatory or technical risk compared to Bitwise 10 Large Cap Crypto Index constituents. These exceptions are necessary given the focus of the index to represent the broader crypto market.

        4. Bitwise 100 Total Market Crypto Index (BITW100): The Bitwise 100 Total Market Crypto Index consolidates the holdings of the Bitwise 10 Large Cap Crypto Index, Bitwise 20 Mid Cap Crypto Index, and Bitwise 70 Small Cap Crypto Index into a single index weighted by free-float-adjusted market capitalization.

          1. Exception: The Bitwise 100 Total Market Crypto Index does not apply rules III.B.i.d, III.B.i.e, III.B.i.f, and III.B.i.g. This means this index can consider crypto assets that trade on only one Eligible Crypto Asset Trading Venue, do not have institutional custody asset support, or face greater regulatory or technical risk compared to Bitwise 10 Large Cap Crypto Index constituents. These exceptions are necessary given the focus of the index to represent the broader crypto market.

        5. 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.

      2. Base Date and Base Level

        The base date for Bitwise 10 Large Cap Crypto Index, Bitwise 20 Mid Cap Crypto Cap Index, Bitwise 70 Small Cap Crypto Index, and Bitwise 100 Total Market Crypto Index, using backtested data, is January 1, 2017. These indexes share a common 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 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 live data on the Bitwise 10 Large Cap Crypto Index is October 1, 2017. The inception date for live data on the Bitwise 20 Mid Cap Crypto Index, Bitwise 70 Small Cap Crypto Index, and Bitwise 100 Total Market Crypto Index is July 31, 2018. The inception date for the Bitwise 10 ex Bitcoin Large Cap Crypto Index is July 30, 2021. All data before these inception dates is backtested data.

    2. 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:

      1. Governance

        1. 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.

        2. 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.

        3. Advisor Board Members and Bios:

          1. 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.

          2. 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.

          3. 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.

          4. 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.

          5. 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.​

      2. Crypto Asset Eligibility

        1. 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.

        2. Security

          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.

        3. 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.

      3. Composition

        1. 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

      4. Inception Date and Base Level

        The inception date for the Bitwise Decentralized Finance Crypto Index is February 15, 2021.

        The index uses a base level of 1000 as of 4pm EST on the inception date.

        No backtest data was created for this index.

    3. 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.

      1. Available Indexes

        The following Bitwise Crypto Equal Weight Indexes are available:

        1. 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.

      2. Asset Pricing Methodology

        1. The Bitwise Crypto Equal Weight Indexes use the Coin Metrics Hourly Reference Rates when pricing crypto assets, including in market capitalization calculations.

      3. 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).

        The selection of 4:00 p.m. Eastern Time on the last Business Day of the quarter is intended to ensure the index is reconstituted at a time of normal trading liquidity.

      4. Inception Date and Base Level:

        The inception dates for the Bitwise Crypto Equal Weight Indexes are as follows:

        1. Bitwise BTC/ETH Equal Weight Crypto Index: April 18, 2022

        The index uses a base level of 1,000 as of 4:00 p.m. ET on the inception date.

    4. 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.

      1. 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.

        1. Exclusions and Conditions

          1. Exclusions

            1. 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).

            2. 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.

          2. 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 select, third-party custodians.

            As of May 31, 2019, the list of custodians included:

            • Coinbase Custody

            • Kingdom Trust

        2. 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.

        3. Daily Index Level

          The index value is struck once per day at 5:00 p.m. Zurich Local Time.

        4. Reconstitution Timing

          The index reconstitution is set at 5:00 p.m. Zurich Local Time on the third-to-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.

        5. Swiss Business Day

          The index relies on the SIX Swiss Exchange’s “Trading Calendar” to determine what counts as a “Swiss Business Day.”

        6. 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.