CoinMarketCap Launches CMC20 — Index Tokens Compete With Multi-Coin ETFs

Key Takeaways

• CoinMarketCap has launched a new intex token.
• CMC20 tracks a basket of the top 20 cryptocurrencies.
• Index tokens present an alternative to off-chain multi-coin investment products.

CoinMarketCap on Monday, Nov. 17, launched CMC20—a new “index token” that tracks a basket of the top 20 cryptocurrencies by market capitalization.

The concept appeals to rising demand for diversified crypto exposure, proposing an on-chain alternative to multi-coin exchange-traded funds (ETFs) and similar investment products.

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Crypto Index Tokens Explained

CMC20 offers weighted exposure to the top 20 cryptocurrencies, excluding stablecoins, wrapped tokens, and assets that present investment challenges. (CoinMarketCap cited XMR, which is borderline illegal in many jurisdictions, as an example of a coin it would exclude.)

The new token is designed to be decentralized and permissionless, with issuance and redemption handled by Reserve Protocol, and trading now live on PancakeSwap and Trust Wallet.

Described as “crypto’s version of the S&P 500,” the index is rebalanced at the end of each month, taking into account any changes in rank and weighting. 

Meanwhile, S&P itself is getting into the crypto index game, with plans to launch the S&P Digital Markets 50 Index (DM50).

Unlike CMC20, DM50 includes a mixture of crypto and equity exposure, consisting of 35 publicly-traded crypto companies, plus fifteen cryptocurrencies selected by S&P. A token tracking the benchmark is being developed by Dinari.

An Alternative to Off-Chain Trackers

While each presents a different approach to index coins, CMC20 and DM50 share the same underlying concept—diversified asset exposure in token form. As such, they can both be viewed as alternatives to more traditional, off-chain crypto trackers.

In Europe, CoinShares and 21Shares offer various multi-asset crypto exchange-traded products (ETPs). These range from simple offerings that combine BTC and ETH exposure to more diversified altcoin ETPs.

In the U.S., the Securities and Exchange Commission (SEC) hasn’t approved multi-coin ETFs structured under the Securities Act of 1933, which is the preferred route to ETF authorization.

However, in recent months, companies including Grayscale and 21Shares have used an alternative structure under the Investment Company Act of 1940 to debut new products. 

Funds issued under the 1940 Act can’t hold 100% spot exposure, so they rely on derivatives and crypto-backed securities instead. For example, new ETFs launched by 21Shares on Nov. 13 will invest in the asset manager’s European ETPs.

Investors Retreat Despite ETF Innovation

Although innovation is booming, the overall market for crypto ETFs/ETPs has shrunk significantly since October.

The five days to Oct. 14 marked the third consecutive week in which crypto investment products experienced net outflows, with investors withdrawing nearly $3 billion during the period.

As the largest segment of the market, U.S.-listed spot Bitcoin ETFs have borne the brunt of the drawdown, including net outflows of $870 million on a single day last week.