THE METHODOLOGY FOR CALCULATING THE INDEX

The emergence of institutional players from the traditional financial segment to the crypto market and the development of instruments on the market as a whole are inextricably linked to the need for reliable data analysis and for decision-making. First of all, fundamental information about the dynamics of the whole market and its individual segments becomes necessary. It should be noted that the market capitalization of existing cryptocurrencies amounted to more than US $580 billion in January 2018.

Most experts believe that the cryptocurrency market will grow at an incredible rate. At the same time, each separate digital currency has a very high level of volatility and, as a consequence, is an extremely risky target for investment. The question is, what is worth investing in?

Taking into account the specifics of the cryptocurrency market, we developed an Index based on the average capitalization of cryptocurrency market that displays all sorts of market trends. We analyze every cryptocurrency that exists on the market and all exchanges where it is traded. Then, we take into account all the necessary details of the trades and determine the average price for each of the currencies. Based on the data obtained, we calculate the average capitalization of each currency, and consequently, the average market capitalization. Based on this value, the Index is then calculated.

Weighted average price of each currency is calculated by the following formula:

, where: Сyr– the price, y — currencies on the exchange r ; wr– weighted part of the sold currency y at a price С on the exchange r.

To calculate Wr we use the following formula:

, where: Myr– part of the sold currency y on the exchange r ; ∑Myr– the sum of the whole y currency on the crypto market.

Total market capitalization is calculated as follows:

, where: Qy — the volume of currency in blockchain.