Cryptocurrency indices vs traditional stock market index

David Kemp

The stock and cryptocurrency markets have a lot in common, but it is a huge mistake to treat them like they are two peas in a pod. They use similar indicators and strategies. What about indices? Compare the features of cryptocurrency and stock summary indicators. 

Stock indices have been used for decades, on their basis, market participants monitor trends and make decisions about transactions. Relatively recently, aggregate cryptocurrency indicators have been calculated. The two groups of indices have much in common, but there are differences. Let's study them in more detail.

Features stock and cryptocurrency index

Each of the indicators is used to display the situation in the industry. If stock indices reflect the situation on the stock market, the cryptocurrency – on the market of digital assets. 

Cryptocurrency indices reflect the state of a significant number of tokens. Stock aggregates often report the state of Affairs in commercial organizations of a certain size or economic sphere. Therefore, cryptocurrency indices are used to assess the investor situation in the entire market.

One of the key stock indicators S&P500 reports on the USA of affairs in 500 us companies with maximum capitalization. The FTSE 100 index includes one hundred of the largest capitalization of organizations that are registered on the London stock exchange. The S&P Global 1200 index includes information exclusively about IT-companies. 

What can you learn from the cryptocurrency index?

Typically, a composite measure reports the current market value of coins, capitalization (calculated as the product of coins and their price) and daily trading volume.

Each platform provides its own index information. Its scope and focus are determined by the target audience. For example, its platform is designed for traders who trade within the day, then the indicators mainly report the minimum and maximum value of the coin for the last day. If the platform is oriented to the long-term perspective, then the indices can be guided by strategic indicators.

Can I trust the values of indices currencies?

It is an important tool that may be used to form your investing strategy and diversify your crypto portfolio. All crypto indices are not the same, so check out at least a few before making a well-thought-out decision.. Indices are so different because they collect information from a huge number of crypto – exchanges, besides trading on them can be conducted for different Fiat currencies-dollars, yen, pounds, euros and others. As a result, the value of the currency in the index is affected by trading volume, transaction fees, a certain market, coin liquidity, the frequency of sending API data, and more. 

Often the essence of stock and cryptocurrency indices is similar, as is the formula for their calculation. However, some summary indicators may differ dramatically due to the specifics of the digital asset market. Cryptocurrency indices often help to look at the market as a whole and objectively, stock indices usually carry information about some industry or even an individual company.

Research the topic before investing your hard-earned money in anything. This will help you get the most out of your information.