In today’s “Crypto for Advisors” newsletter, Dovile Silenskyte, Director of Digital Asset Research at WisdomTree, breaks down crypto indices, what they are, and discusses key considerations.
Next, in “Ask an Expert,” Eric Tomasewzki, financial advisor at Verde Capital Management, answers advisors’ questions about building crypto portfolios using indices.
–Sarah Morton
The Quiet Crypto Revolution: Index Design
As institutions gain exposure to digital assets, a simple reality becomes clear: in crypto, the methodology is the product.
Behind each index lies an invisible architecture: how assets are chosen, how they are weighted, how often they are rebalanced and what data feeds underpin them. These design choices don’t just shape performance. They define trust, transparency and product viability.
An index built on reliable data, verified prices and clear governance becomes more than a benchmark. It becomes infrastructure. The line between a basket of speculative tokens and an institutional quality index is drawn by design integrity.
The new rules for constructing indices
Crypto does not follow the same data logic as stocks. Supply can be staked or locked. Liquidity resides in dozens of locations. Regulations can redraw the map overnight.
Illustrative comparison of the offer
Source: Terminal Artemis, WisdomTree. November 12, 2025. Historical performance is not an indication of future performance and any investment may lose value.
This means that creating a cryptographic index is part data engineering and part governance design. A well-constructed benchmark is not just a performance monitoring tool. This is an investment framework.
It all starts with intention. Are you aiming for broad market exposure or a specific narrative like decentralized finance (DeFi) or layer 1 innovation? This objective shapes the universe of eligible tokens, liquidity thresholds and rebalancing cadence. Go too far and you capture the noise; too narrow, and you’re speculating, not comparative analysis.
Strong cues impose discipline. Liquidity and size filters to avoid ghost tokens, custody and exchange screens to ensure institutional access, and governance filters to exclude opaque or security-like assets. In crypto, eligibility rules are the new gatekeepers because they separate investment credentials from theoretical credentials.
Weighting, maintenance and market reality
Weighting tells the story of market structure. A market cap approach highlights dominance: bitcoin and ether often make up 80-90% of a market cap-weighted index, while equal or capped weighting gives smaller protocols space to shine.
Side-by-side comparison of CoinDesk 5 and CoinDesk 5 Equal Weight Indexes
Source: CoinDesk Indices Announces Final October 2025 Reconstruction Results for the CoinDesk 20 Index Family. October 3, 2025.
But weighting alone does not guarantee the sustainability of an index. Maintenance does.
Cryptocurrencies trade non-stop. Tokens fork, migrate, and sometimes disappear overnight. Quarterly rebalances, liquidity tests and concentration caps are not optional. They are survival tools. They ensure that an index remains investable and relevant as the shape of the underlying market changes in real time.
The institutional test
Index design is now the hidden frontier of the institutional crypto era. This is where technical precision meets investor confidence. In contrast, transparent, rules-based indices provide the foundation for sustainable exchange-traded products (ETPs) that investors can truly trust.
For a more in-depth analysis, read the full article: Market Insight: Crypto Index Construction.
IMPORTANT INFORMATION
This material is prepared by WisdomTree and its affiliates and is not intended to be used as a forecast, research or investment advice, and does not constitute a recommendation, offer or solicitation to buy or sell any security or adopt any investment strategy. Opinions expressed are as of the date of production and may change depending on subsequent conditions. The information and opinions contained herein come from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no liability otherwise arising for errors and omissions (including liability to any person due to negligence) is accepted by WisdomTree, nor any affiliated company, nor any of their officers, employees or agents. Reliance on the information contained herein is at the sole discretion of the reader.. Past performance is not a reliable indicator of future performance.
– Dovile Silenskyte, Director, Digital Asset Research, WisdomTree
Ask an expert
Q: What makes a crypto index meaningfully diversified when everything seems correlated?
A: Correlation in cryptocurrencies tends to increase during stress events, but dispersion can be massive over full cycles. A meaningful crypto index avoids simply overweighting what has the largest market cap.
We are looking for:
1. Differentiated economic models or categories such as layer 1 (L1), layer 2 (L2), liquid staking, restaking, real-world assets, and decentralized exchanges (DEX)
2. Sustainable symbolic emissions
3. Capturing actual costs (revenue)
The goal is not necessarily to eliminate volatility. This means avoiding a portfolio that unknowingly follows a single narrative.
Q: Should Bitcoin always be the anchor weight in a diversified crypto portfolio?
A: Yes. Bitcoin is the only digital asset with commodity-like monetary properties, predictable issuance, and no venture capital-like dilution.
For most investors, Bitcoin serves as a risk control asset within crypto, not a risk asset. We typically anchor portfolios with 50-70% BTC, depending on risk tolerance. From there, we build satellite positions around growth themes.
Q: What is a reasonable rebalancing schedule for a crypto model portfolio?
A: A quarterly method generally works best. This is frequent enough to capture dispersion, but not so frequent that you overclassify the noise. For advisors managing through L1 Advisors, Safe, or custodial platforms, rebalance when tokens cross predefined bands (e.g., BTC deviates 10% from target weight). Discipline removes emotion from a highly emotional asset class.
Q: Where do you see the next major change in index construction?
A: I see the industry moving from asset-based to cash flow-based indices.
Instead of “top 10 assets by size,” we can see indices weighted by:
- protocol revenue
- performance efficiency
- validator economy
- recovery in demand
- Growth of RWA guarantees
This reflects the shift from simple market capitalization indices to smart equity beta.
– Eric Tomasewzki, financial advisor, Verde Capital Management
Continue reading
- Harvard University’s endowment disclosed a $443 million stake in BlackRock’s iShares Bitcoin Trust (IBIT), making it the fund’s largest known stock position, accounting for 20%.
- The US Office of the Comptroller of the Currency has issued guidance to banks that they can hold cryptocurrencies for the purpose of paying blockchain transaction fees.
- New Hampshire approves first $100 million bitcoin-backed municipal bond.
