Basket Indexes
Index Methodology for the Vinter Crypto Basket Indexes
Last updated
Index Methodology for the Vinter Crypto Basket Indexes
Last updated
The Vinter Crypto Basket Indexes are a family of benchmarks developed to provide a rule-based and transparent way to track the value of a portfolio. Each index measures the value of an investment strategy.
This methodology clearly determines what constitutes an active market for each index and establishes the priority given to different types of input data. The methodology considers factors like the size and liquidity of the market, the transparency of trading, the positions of market participants, market concentration, and the adequacy of any sample to represent the market or economic reality that the benchmark intends to measure.
Invierno AB ("Vinter") is a pioneering index provider specializing in crypto assets. The firm plays a key role in the emerging crypto ETF industry. The firm collects digital asset data from hundreds of sources, transforming proprietary strategies into investable products. Read more at .
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A market index is a passive index designed to track the returns of the crypto market or parts thereof. Constituents are weighted by market capitalization by default.
Asset selection: Top 5 by 90 days average market capitalization.
Rebalance weights: Current market capitalization.
Rationale: A passive index capturing the crypto market that is easy to hedge and trade.
Ticker: VNMC5
Asset selection: Top 10 by 90 days average market capitalization.
Rebalance weights: Current market capitalization.
Rationale: A passive index capturing the crypto market that is easy to hedge and trade.
Ticker: VNMC10
Asset selection: Top 5 by 90 days average market capitalization.
Rebalance weights: Weigh all assets equally.
Rationale: A passive index assigning equal weights to top assets.
Ticker: VNEQ5
Asset selection: Top 10 by 90 days average market capitalization.
Rebalance weights: Weigh all assets equally.
Rationale: A passive index assigning equal weights to top assets.
Ticker: VNEQ10
A strategic index measuring a strategically chosen sub-section of the crypto market. The strategic indexes are less passive than the market indexes.
Asset universe: Decentralized Finance (DeFi) assets
Asset selection: Top 5 by 90 days average market capitalization.
Rebalance weights: Current market capitalization.
Rationale: DeFi is a subcategory of the crypto universe with high growth.
Ticker: DEFI5MC
Asset universe: Smart contract platforms.
Asset selection: Top 5 by current market capitalization.
Rebalance weights: Current market capitalization.
Rationale: Smart contracts can automatize tasks done by humans and reduce the need for trust.
Ticker: LAY1MC
Asset universe: Layer-2 assets.
Asset selection: Top 5 by current market capitalization.
Rebalance weights: Current market capitalization.
Rationale: Layer-2 projects represent the infrastructure needed to scaled blockchain networks.
Ticker: LAY2MC
Asset universe: Tokenization assets.
Asset selection: Top 5 by current market capitalization.
Rebalance weights: Current market capitalization.
Rationale: Tokenization assets enable digitalizing real-world assets, unlocking new liquidity and investment opportunities through blockchain ecosystems.
Ticker: VNTKNMC5
Asset universe: AI infrastructure assets.
Asset selection: Top 5 by current market capitalization.
Rebalance weights: Equally weighted.
Rationale: AI infrastructure assets enable decentralized AI, distributed computation, or leads the market in AI-driven blockchain applications.
Ticker: VNAIEQ5
Asset universe: Metaverse and Metaverse chain.
Asset selection: Top 5 by market capitalization.
Rebalance weights: Equally weighted.
Rationale: Invest in assets that develop the foundational infrastructure for the metaverse, as well as in metaverse-related assets themselves.
Ticker: VNMETACEQ5
Asset universe: Proof-of-Stake assets.
Asset selection: Top 10 by market capitalization.
Rebalance weights: Current market capitalization.
Rationale: The proof-of-stake (PoS) consensus mechanism exhibits several unique characteristics compared to proof-of-work (PoW). The index is suitable for investors who think PoS is superior to PoW.
The BOLD2 index allocates to bitcoin and PAX gold. Periodic rebalancing brings the current weight to the target weights. The weight in bitcoin (BTC) after each rebalancing is proportional to its inverse volatility, so that an equal amount of risk is allocated to both assets. The weight of PAX gold (PAXG) is one minus the weight in bitcoin.
Asset selection: BTC and PAXG.
Target weights: Proportional to the inverse volatility, so that an equal amount of risk is allocated to both assets. The weight in bitcoin is calculated as IVB/(IVB + IVG) where IVB is the inverse volatility of bitcoin and IBG is the inverse volatility of gold. Volatilities are calculated using 360 days of data.
Rebalanced: Monthly on the last business day of the month.
Factor investing is an investment approach that involves targeting quantifiable characteristics called “factors” that can explain differences in asset returns. Characteristics that may be included in a factor-based approach include size, volatility, value, momentum, leverage, carry and profitability.
Asset universe: BTC and CSHI.
Rebalance weights: Proportional to the BTC Sharpe Signal.
Rationale: The BTC Sharpe Signal is computed measuring the sharpe ratio of a short term window (90 days) and ranking the obtained value over a longer time window (730 days). The BTC weight is proportional to the ranking of the signal. This strategy measure the strenght of BTC over long-term cycles.
The momentum scores per asset are calculated on the review date as follows.
Get the 30-day and 60-day returns for all assets.
Calculate the risk-adjusted return by dividing the returns with the volatility of the asset. The volatility is calculated using daily data for the last three months.
Convert the 30-day risk-adjusted returns to a Z-score by subtracting the assets’ mean and dividing by the assets’ standard deviation.
Convert the 60-day risk-adjusted returns to a Z-score by subtracting the assets’ mean and dividing by the assets’ standard deviation.
Average the two Z-scores.
Apply a cap and a floor so the value cannot be above 3 or below minus 3.
Convert the capped and floored Z-score to a positive Z-score by raising 1.5 to the power of Z.
The momentum score is proportional to this positive Z-score. The momentum score per asset is a number between 0 and 1, and they sum to 100%.
This section defines the general construction parameters used in designing the index such as the asset universe, the asset selection and the rebalancing weights. This section contains the details needed to calculate each index.
The index constituents are selected from the asset universe. One example is to select the ten largest assets based on the current market capitalization. In general, the selection process can be based on a number of factors such as market capitalization, trading volume, returns, volatility, or a combination thereof.
Assets are selected on the review date, which is five business days prior to the rebalancing date. Note that Review Date is not the same as the Yearly Review.
If it is not possible to reach the intended number of constituents, the Index Committee can decide to either include non-eligible constituents or allow the index to have fewer constituents than intended. The decision shall be made publicly available.
Rebalance weights are calculated on the review date.
The current weight per asset displays the current asset allocation and is relevant for an ETF creation/redemption. The current weights change every day, based on price movements, whereas the rebalance weights are unchanged between rebalances. The rebalance weights are updated only when the index is rebalanced.
The weight for each asset is always between 0 and 1. The sum of all constituent weights is equal to 100%.
Rebalancing involves the selection of constituents and the calculation of their rebalancing weights. Calculations are done using the closing prices on the rebalancing date. The new weights per asset are used on the opening of the day after rebalancing.
After the rebalance, the portfolio is updated so that its current weights per asset equal the rebalancing weights per asset. The bigger the difference between the current weight and the rebalancing weight, the larger the portfolio turnover.
The index value is given by the weighted sum over all constituents of quantity times price divided by a divisor.
The price per asset is calculated by Vinter, as detailed in the constituent pricing section.
The quantity per asset is set to the Rebalancing Weight per asset after rebalancing. In a price return index, the quantity per asset is unchanged between rebalances.
The divisor enforces index continuity on rebalancing. The divisor is defined so that the index starts at a certain start value, which ensures each index tracks the value of a certain amount of capital invested on the start date.
The market capitalization is given by price times circulating supply. Using circulating supply is similar to using public float for an equity index. The market capitalization is calculated at midnight UTC.
Invierno AB, Reg. No. 559207-4172, Box 5193, 10244 Stockholm, Sweden (“Vinter”)
Vinter is the benchmark administrator and the central recipient of input data with the ability to evaluate the integrity and accuracy of input data on a consistent basis. Vinter is responsible for the development of the index and controls all aspects of the provision of the benchmark. Vinter has established a permanent and effective oversight function, governance processes subject to periodic reviews and audits, policies regarding complaints, ethics, conflicts of interest, and contingency, and has established a clear internal organizational structure with consistent roles and responsibilities to identify, prevent, disclose, mitigate, and manage conflicts of interest.
Vinter is the calculation agent and is responsible for determining the value of the index described in the index methodology. Vinter calculates the index values in accordance with the index methodology. Upon the request of the benchmark administrator, the calculation agent shall provide all information available on the composition and details of the calculation of the requested index.
Version
Date of update
Change
1.0.
2020-06-22
Publish initial version.
2.0.
2020-12-30
Edit eligibility criteria, formulas, rebalancing date, administration section, default asset selection.
2.1.
2022-11-04
Add indexes and split it into sub-sections
3.0.
2023-09-11
Add General construction parameters and Vanilla indexes
Any product(s) offered with the indexes described in this methodology as underlying is not in any way sponsored, endorsed, sold, or promoted by Invierno, reg. no. 559207-4172 (“Vinter”). Vinter does not make any warranty or representation whatsoever, expressly or impliedly either as to the results to be obtained from the use of the index(es) “Index” described, licenses, used, or referenced under any Programme or Prospectus and/or the figure at which the Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated solely by Vinter. However, Vinter shall not be liable (whether in negligence or otherwise) to any person for any error in the Index and Vinter shall not be under any obligation to advise any person of any error therein. Vinter is a registered trademark owned by Invierno AB. Invierno AB and its indexes are protected by various intellectual property rights. All third-party use of Vinter and its indexes require by law a licensing agreement with Invierno AB. The Index is a product of Invierno AB. Any Programme referencing the Index is not sponsored, endorsed, sold, or promoted by Vinter and/or its affiliates, and none of such parties makes any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Index. The Programme is in no way sponsored, endorsed, sold, or promoted by Vinter and its Licensors and neither of the Licensors shall have any liability with respect thereto. Vinter is not a registered investment advisor, tax advisor or broker/dealer. The content of the index methodology or its related documents underlying is intended only to provide general and preliminary information and shall not be construed as investment, tax, legal or financial advice. The reader shall ensure that all of his or her investment decisions are not made based on the content of this document and shall be solely responsible for all financial losses made in connection with investment decisions. Nothing contained in the index methodology or its related documents constitutes a solicitation, recommendation, endorsement, or offer by Vinter or any third party associated with Vinter to buy or sell any financial instruments in this or any other jurisdiction. Although best efforts are made to ensure that all information on the methodology documents is accurate and up to date, occasionally unintended errors and misprints may occur. The index owner grants the benchmark administrator an exclusive, royalty-free, non-transferable, non-sublicensable license to use the index owner's intellectual property rights to fulfill the benchmark administrator's obligations under the index agreement and the Benchmarks Regulation, including registration of identifiers for indexes. Vinter is a registered Benchmark Administrator by Finansinspektionen (FI) and the European Securities and Markets Authority (ESMA) under Article 34 of the European Benchmarks Regulation (2016/1011).
The asset universe is a list of all possible index constituents. The default asset universe consists of all eligible constituents. It is possible to restrict the universe to assets that only contain a certain label e.g. Metaverse or Web3 as defined in the .
All indexes are rebalanced periodically, following the .
Assets are eligible as index constituents if they meet the listed in Vinter’s benchmark statement.
The Vinter reference rates are used to price assets and can vary from one index to another. The algorithms are described in . The defines the eligibility criteria for input data.