When talking about trading, normally those who are outside this world think about buying and selling shares. However, the financial market is full of products in which you can invest. From stocks and bonds, through currencies and cryptocurrencies, to reaching future contracts and of course indices, such as the crypto or crypto 10 volatility index we will talk about today.
Indices inside and outside the crypto world
If we are interested, even moderately, in informing ourselves about what is happening in the world. It is likely that terms such as the “S&P 500 index” or “Dow Jones index” have been sneaked into our vocabulary. As a way of referring to what is happening in the New York Stock Exchange, and in general in the US financial market.
But what is an index? In simple terms, an index is a financial product that measures the performance of a set of assets. Therefore, you can invest in an index as if you were investing in a company, and when you do it your money is distributed among all the assets that make up that index.
Either the 500 companies in the S&P list, or a group of cryptocurrencies, as with the Crypto 10 index. Changing the value of your investment according to the behavior of that group of assets, according to established criteria.
Therefore, the indices end up fulfilling a double function within the economy. First, they serve as an indicator of the state of a market sector, showing whether in general it is having a positive or negative behavior. And secondly, they serve as an investment instrument, so that traders can minimize risks and make a profit, based on the performance of an asset basket.
The crypto volatility index
Thus, it is clear that investment in stock indexes can prove to be a very smart move. Especially when it comes to the crypto market, where in most cases, the biggest gains are for those who decide to take advantage of financial products such as future contracts, contracts for difference or indices.
What makes the crypto volatility index or crypto 10 index, one of the main options to invest in the market. Having been created to measure the performance of the top 10 cryptocurrencies for their market capitalization, including within themselves the price of Bitcoin, Bitcoin Cash, Ethereum, Ripple, EOS, Litecoin, Monero, Cardano, IOTA and Dash.
It was designed by BITA, a firm based in Germany, which also established how the weight of each cryptocurrency would be distributed within the financial product. With Bitcoin and Ethereum defining 50% of the value of the index, and the rest of the crypto assets distributed among the remaining 50%, as indicated in the following graph:
In this way, the stability of the volatility index depends on several cryptocurrencies at the same time. Minimizing the possibility of acute losses for those traders who decide to invest their capital in it, by distributing the risk among all these crypto assets, instead of concentrating on one.
Being the investment in this index, in addition, an extremely simple process thanks to the facilities offered by Plus500, one of the main crypto market brokers. And with which you can invest in this index quickly and safely, as we will explain in our next article dedicated to Crypto 10.