The Bitwise Crypto Asset Indexes provide investors with a structured, rules-based framework for tracking the performance of individual cryptocurrencies and market segments. Designed to meet institutional standards, these indexes serve as reliable benchmarks for active investment strategies, underlying indexes for index-tracking funds, and tools for measuring market returns over time.
Guiding Principles and Indexing Approach
The development of Bitwise Crypto Indexes addresses the unique challenges of the cryptocurrency market by adapting established traditional asset indexing principles. These indexes prioritize clarity, transparency, and investability through several core principles:
- All indexing and pricing decisions follow a clear, rules-based process
- Committee judgments are documented and made publicly available
- Index construction considers liquidity, trading venue stability, custody limitations, and capital controls
- Methodologies ensure indexes remain replicable and practical for investment purposes
This approach combines traditional indexing best practices with necessary adjustments for the crypto asset ecosystem.
Governance Structure
Bitwise Crypto Index Committee
The Bitwise Crypto Index Committee holds primary responsibility for developing, maintaining, and adjusting index methodologies while verifying all data sources used in calculations.
Committee Responsibilities:
- Monthly meetings occur one week prior to rebalance dates
- Review and verify data sources for accuracy and reliability
- Approve new methodologies and changes to existing approaches
- Document and publicly explain all methodological decisions requiring judgment
- Handle emergent issues as needed
Decisions require a simple majority vote with a quorum of two members. The committee follows the New York Stock Exchange holiday calendar for business day determinations.
Committee Members:
- Matt Hougan (Chairman): Chief Investment Officer at Bitwise Asset Management, ETF Hall of Fame member, and co-author of CFA Institute publications on ETFs and cryptocurrencies
- Hunter Horsley: Co-founder and CEO of Bitwise Asset Management, former product manager at Facebook and Instagram
- Hong Kim: Co-founder and Chief Technology Officer at Bitwise, former software security researcher
Bitwise Crypto Index Advisory Board
The Advisory Board comprises experts in traditional asset indexing and cryptocurrency markets who provide non-binding recommendations on methodological issues.
Advisory Board Members:
- Spencer Bogart, CFA: Partner at Blockchain Capital, former Wall Street analyst and leading bitcoin researcher
- Srikant Dash, CFA: Former Managing Director and Global Head of Research & Design at Standard & Poor's, creator of the SPIVA report and architect of indexes tracking over $200 billion in assets
Eligibility Requirements
Crypto Asset Trading Venue Eligibility
Trading venues must meet stringent criteria to ensure price integrity and institutional accessibility:
- Open Platform Operation: Must facilitate crypto-to-crypto or crypto-to-fiat trading
- Capital Control Compliance: Cannot be domiciled in jurisdictions with restrictive capital controls
- Regulatory Standing: Must not face extraordinary regulatory actions that could disrupt pricing
- Fee Structure: Must charge trading fees to discourage wash trading
- API Reliability: Must maintain secure, functioning APIs for data ingestion
- Operational Stability: Must demonstrate minimal downtime, withdrawal issues, or security concerns
- Volume Thresholds: Must account for >1.0% of total 30-day dollar trading volume across eligible venues
- Real Trading Activity: Must demonstrate significant authentic spot trading volume
Venues undergo annual reviews and may be removed immediately under extraordinary circumstances by unanimous committee vote.
Crypto Asset Eligibility Requirements
Assets must satisfy multiple criteria to qualify for inclusion:
- Digital Bearer Instrument: Must be cryptographically secured digital assets
- Non-Pegged Value: Cannot be pegged to other assets or currencies (excluding specific index exceptions)
- Free Trading: Must be freely tradable and holdable without restrictions
- Venue Support: Must trade on eligible venues without asset-specific withdrawal issues
- Custody Solutions: Must be supported by regulated custodians including Anchorage, BitGo, Coinbase Custody, Fidelity Digital Assets, and Gemini Custody
- Security Standards: Must have no known critical vulnerabilities or exposure to 51% attacks
- Regulatory Compliance: Must not face undue risk of violating U.S. federal securities laws
- Liquidity Requirements: Must trade >1% of free-float-adjusted market capitalization over 30 days
- Price Stability: Must maintain unit price >$0.01 for 30 consecutive days
- Non-Memecoin Status: Cannot be classified as memecoins by committee determination
- Additional Factors: Committee may consider supply curves, token distribution, usage potential, developer activity, and contributor reputations
Assets violating requirements for 30 consecutive days are removed at next reconstitution, though emergency removals can occur same-day by unanimous vote. Hard forks receive 45-day exemptions from volume requirements.
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Asset Pricing Methodology
Price Determination
Bitwise Crypto Indexes utilize Lukka Prime Intraday pricing for all constituent assets, ensuring consistent and reliable valuation across the ecosystem.
Network Distribution Treatment
The methodology addresses various distribution types differently:
Hard Forks
- Committee determines continuing versus forked assets based on market capitalization factors
- Forked assets are not incorporated into index values
- Fund managers may claim forks separately for potential excess returns
Emissions
- Regular network rewards (e.g., "gas" distributions) are excluded due to minimal daily values
- Funds may accumulate emissions separately for periodic liquidation
Airdrops
- One-time distributions to existing asset holders are excluded from index calculations
- Requires active claiming by holders and may involve additional risks
- Fund managers may pursue airdrops separately for potential excess returns
Staking Rewards
- Rewards for transaction validation collateral are excluded due to liquidity restrictions
- Requires active participation and locks up assets for periods
- Fund managers may pursue staking strategies separately
Market Capitalization Methodology
Bitwise calculates market capitalization using Lukka Prime Intraday prices multiplied by free-float-adjusted issuance, excluding:
- Developer, principal, foundation, or affiliated entity holdings
- Publicly known lost or burned coins
- Other illiquid supplies as determined by the committee
Free-float adjustments occur monthly at 4 p.m. ET one week prior to rebalance dates and remain effective until subsequent recalculations.
Index Maintenance and Distribution
Available Index Types
All Bitwise Crypto Indexes function as Total Return indexes, incorporating certain network distributions according to methodology rules.
Publication Levels
Daily Index Levels
- Official values published at 4 p.m. ET daily
- Incorporate all eligible network distributions occurring before publication
- Distributed by 5 p.m. ET barring data issues
Hourly Levels
- Estimated values published hourly
- Do not incorporate inter-daily network distributions
- Not amended for data corrections until daily publication
Reconstitution Guidelines
Indexes reconstitute monthly at 4 p.m. ET on the last business day, with record dates set one week prior at 4 p.m. ET. A 10% market capitalization buffer prevents unnecessary turnover—assets are only replaced if alternatives exceed their market cap by 10% for five consecutive days leading to the record date.
Index Series Specifics
Market Capitalization Indexes
Bitwise 10 Large Cap Crypto Index (BITX)
- Tracks 10 largest eligible assets by free-float-adjusted market capitalization
- Base date: January 1, 2017 (base level: 964, matching bitcoin's price at UTC midnight)
- Live data inception: October 1, 2017
Bitwise 10 ex Bitcoin Large Cap Crypto Index
- Contains BITX constituents excluding bitcoin (typically 9 assets)
- Base date: July 30, 2021 (base level: 45,807.91, matching BITX level at 4 p.m. ET)
Decentralized Finance Index
The Bitwise Decentralized Finance Crypto Index tracks assets native to blockchain applications using smart contracts for financial services competing with traditional financial service business lines.
Governance
Supported by a specialized Advisory Council including:
- Michael Anderson (Framework Ventures)
- Ben Forman (ParaFi Capital)
- Avichal Garg (Electric Capital)
- Aleks Larsen (Blockchain Capital)
- Scott Lewis (DeFi Pulse)
Eligibility Considerations
- Additional security factors: audit availability, formal verification, exploit history, development response
- Usage factors: value locked, developer activity, community evidence, advisor input
Composition
- Includes up to 10 largest eligible assets meeting specific DeFi criteria
Equal Weight Indexes
Bitwise BTC/ETH Equal Weight Crypto Index
- Equal-weighted combination of bitcoin and ether
- Uses Coin Metrics Hourly Reference Rates for pricing
- Rebalances quarterly at 4 p.m. ET on last business day of quarter
- Inception: April 18, 2022 (base level: 1,000)
Partnership Indexes
Bitwise Select 10 Large Cap Crypto Index (BITS10)
Tracks up to 10 leading cryptocurrencies with specific exclusions:
- Privacy coins enabling anonymous transactions
- Platform-dependent tokens issued on third-party blockchains (e.g., ERC-20 tokens)
- Additional requirements: Swiss Stock Exchange acceptance, authorized participant support, custody availability at Coinbase Custody and Kingdom Trust
- Base date: January 1, 2017 (base level: 964)
- Live data inception: May 17, 2019
- Values struck at 5:00 p.m. Zurich time daily
- Reconstitutes at 5:00 p.m. Zurich time on last Swiss business day
- Follows SIX Swiss Exchange trading calendar
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Frequently Asked Questions
What makes Bitwise indexes different from other crypto benchmarks?
Bitwise indexes combine traditional indexing methodologies with crypto-specific adaptations, emphasizing institutional-grade custody solutions, liquidity requirements, and transparent governance. The committee-based approach ensures consistent application of rules with public documentation of decisions.
How frequently are the indexes rebalanced?
Most Bitwise indexes reconstitute monthly on the last business day at 4 p.m. ET, with record dates set one week prior. The equal-weight index rebalances quarterly, while partnership indexes may follow different schedules aligned with specific market requirements.
Why are some popular cryptocurrencies excluded from certain indexes?
Exclusions result from specific eligibility criteria including custody requirements, regulatory considerations, security assessments, and categorization rules. Some indexes explicitly exclude privacy coins or platform-dependent tokens to meet particular investment objectives or regulatory frameworks.
How does Bitwise handle forks and airdrops?
The methodology generally excludes the value of hard forks, airdrops, emissions, and staking rewards from index calculations due to the active claiming required and potential risks involved. Fund managers tracking these indexes may pursue these distributions separately to generate excess returns.
What custody solutions are accepted for asset eligibility?
Bitwise requires custody through regulated entities including federally chartered banks or state trust companies meeting additional security and insurance requirements. Currently approved custodians include Anchorage, BitGo, Coinbase Custody, Fidelity Digital Assets, and Gemini Custody.
How can investors access these indexes?
The indexes serve as benchmarks for investment products including exchange-traded funds and other structured products. Investors should consult with financial advisors to identify appropriate vehicles tracking specific Bitwise indexes that match their investment objectives.