Original author:Ignas, DeFi researcher
Original compilation: Leo, BlockBeats
Original author:
, DeFi researcher
Original compilation: Leo, BlockBeats
Recently, the encryption index platform Alongside completed $11 million in financing, led by a16z, with participation from Coinbase Ventures, Franklin Templeton Investments, Village Global, and Not Boring Capital. For users, this project seems to be unfamiliar, but for a not-so-popular encryption project, this level of financing can be completed-the financing amount and investment institutions are very good, backed by high-quality venture capital, this may be The next "wealth password" in the encryption market. To this end, BlockBeats inquired about the content of the encryption index track, which was previously written by DeFi researcher Ignas. Compile as follows:
The stock index accounts for 18% of the TradFi stock market, according to the data. And the crypto index accounts for only 0.007% of the crypto market. Therefore, the moment when the on-chain index shines may be earlier than you think. The reasons for being bullish on the crypto index are as follows:
Alongside, a cryptocurrency index platform, completed a financing of US$11 million last week, led by a16z and participated by Coinbase Ventures. In fact, DeFi projects usually raise $1 million to $4 million. DeFi index projects are all undercapitalized, and Alongside's Crypto Market Index (AMKT) has only 341 holders. VCs are often forward-looking, so this is an area not to ignore.
In the early years, Buffett once said: "By investing in index funds regularly, an amateur investor who knows nothing can often beat most professional investors." The stock index obtains information by tracking the trend of a group of stocks, such as the S&P 500. But it’s early days for crypto indices, and most experienced crypto natives feel they can manage their positions better.
For investors, it is necessary to constantly measure and judge the performance of projects and tokens. The current encryption market is based on BTC and ETH. In order to prove its value, the encryption index needs to surpass them. However, the largest DeFi Index (DPI) developed by Index Coop has been lagging behind ETH.
If you believe in the future of DeFi, it makes sense to hold ETH, because ETH is the foundation of the DeFi ecosystem, and DeFi blue-chip projects are built on it. And the same applies to the NFT ecosystem, with ETH also serving as a token for the growth of NFT adoption.
In addition, ETH does not have the "inflation" that plagues DeFi tokens, and is widely recognized as the best collateral for cryptocurrencies. However, some DeFi tokens far outperform ETH, so a good index must bring higher upside potential, while Minimize risk.
During the DeFi Summer period, new DeFi projects appeared every day, DPI’s popularity surged, and it was difficult to synchronize all developments in this field. The high amount of Gas also hindered small investors from diversifying their investments in multiple DeFi tokens. Finally, because investors think these indexes are too risky, the fall of 2021 experienced a market correction, and DPI and other indexes fell back. People still feel that these indexes are too risky and chose to exit, which is also the main reason for capital outflows.
For example, in October 2021, Indexed Finance DEFI 5 was attacked and stolen, losing about US$18 million in assets. The attacker was an 18-year-old mathematician. The attacker used flash loan transactions to rebalance the index pool. Therefore, holding ETH or BTC is safer in the context of such a high crypto correlation.
However, with mass adoption and market maturity, crypto indices will make sense and the track is expected to grow, and I think the recent $11 million seed round of Alongside is the "guideline" to usher in the era of crypto indices. torch".
The CEO of Alongside once stated: “Our goal is a low-fee index product designed to make the entire market accessible to the entire cryptocurrency.”
-Index Coop
-Alongside Finance
-Phuture Finance
-Indexed Finance
-PieDAO
In the TradFi market, indices are crowd capital allocations, and they follow a set of guidelines called a "methodology", usually weighted by market capitalization, adding or removing assets based on their market capitalization. AMKT currently only supports 25 cryptoassets as there is no liquidity depth for other assets.
Index Coop
Currently, the main crypto index builders in the crypto market are:
-DeFi Pulse Index（DPI）
-Metaverse Index（MVI）
-Bankless BED Index（BED）
secondary title
Phuture Finance
The crypto indices launched by Index Coop include:
-Phuture DeFi Index（PDI）
-Colony Avalanche Index（CAI）
-USDC Savings Vault（USV）
Most of the TVL is ETH LSD, it looks like they are prioritizing staking ETH services.0xPhuture Finance is different from Alongside, they offer non-custodial, on-chain and yield-generating products. include:
Indexed finance
Execute transactions, which means that users can execute large transactions, because users have 100% mint rights to assets, and Phuture has integrated with Yearn to allow some assets to generate yield.
PieDAO
secondary title
PieDAO, an early adopter of crypto indices structured through Balancer pools, recently announced a move from passive management to active management, where “holders manage the funds owned by the DAO and are responsible for generating yield.”
epilogue
The key is "due to the limited market adaptability of index products in the encryption ecosystem." Their index business was loss-making, so they pivoted to a revenue-generating money gain business through active governance. Lesson learned: Timing is of the essence.
first level title
epilogue
So it's still early days for crypto indices, this is my counter-market narrative trading thinking as indices make a lot of sense in TradFi, as the market matures they will prevail in the crypto market too, current solutions only support 30 token, but I am more looking forward to the 500 tokens of the S&P category appearing in the future encryption market.
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