Sorting Out the Crypto World
September 29, 2023
Read Time 2 MIN
Please note that VanEck may have a position(s) in the digital asset(s) described below.
Detecting patterns is an ability we develop early in infancy and refine by experience throughout human life. Categorization is an important part of how humans learn and make optimized decisions when faced with multiple data points. In the crypto world, with over 22,000 coins, there is an increasing need for a rigorous classification system to structure investment decisions.
MarketVector, a VanEck subsidiary, develops, monitors and markets the MarketVector Indexes, a focused selection of pure-play and investable indices. In 2017, MarketVector in partnership with CryptoCompare—an established London-based digital assets data provider—became the first regulated index provider to launch a series of digital assets indices designed to most accurately track the performance of the otherwise fragmented global digital assets markets. These indices were the first to meet investment industry benchmarking standards by providing a public rulebook, industry-wide data distribution, proper identifiers and further standard index governance requirements. Today, MarketVector is regulated under the EU Benchmark regulation directive and is the first index provider with such regulatory status to offer transparent and industry standard digital asset indices.
MarketVector introduces a categorization of digital asset coins into distinct, non-overlapping categories that form the building blocks for a new crypto classification scheme. Categories capture the value and use case related to a coin. Using a qualitative process, each coin is categorized into one category. Coins may change categories over time and new categories may emerge. The MarketVector"Leaders" investable category indices capture the largest and most liquid coins within a category which are also supported by major US crypto exchanges and custodians.
Categories allow investors to group similar digital assets into groups to analyze and proxy targeted exposures. They enable deeper analysis into peers and aggregated performance review. As the basis for investable indices, they provide the underlying components to build an investment solution aimed at capturing the performance of the coins within the category. They allow users to measure, benchmark and capture the performance and characteristics of targeted categories. MarketVector categories will help make digital assets digestible to traditional finance investors while giving crypto native funds additional benchmarking capabilities.
| MarketVector Digital Asset Categories | |||
| Category | Definition | Examples | |
| DeFi | Financial services built on top of distributed networks with no central intermediaries | Uniswap, Aave, dYdX | |
| Exchange | Tokens owned and operated by a centralized cryptocurrency exchange | Binance Coin, Huobi Token, KuCoin Token | |
| Infrastructure Applications | A decentralized computer program designed to perform specific tasks | Helium, Chainlink, Render | |
| Media & Entertainment | Used to reward users for content, games, gambling or social media | Axie Infinity, Basic Attention Token, Audius | |
| Payments | Digital, non-stable money for use in distributed network | Stellar, XRP, Litecoin | |
| Smart Contract Platforms | Blockchain protocol designed to host variety of self-developed and 3rd party applications | Ethereum, Optimism, Solana | |
| Stablecoins | Designed to minimize volatility by pegging to a more stable asset | Tether, US Dollar Coin, Dai | |
| Store of Value | Designed to hold or increase purchasing power over time | Bitcoin | |
Source: MarketVector Indexes. Data as of 9/18/2023.
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DISCLOSURES
Source: Messari as of 9/20/2023.
Important Information Regarding Cryptocurrencies.
The information herein represents the opinion of the author(s), an employee of the advisor, but not necessarily those of VanEck. The cryptocurrencies discussed in this material may not be appropriate for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any cryptocurrencies, or to participate in any trading strategy.
Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. References to specific securities and their issuers or sectors are for illustrative purposes only.
Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.
Investing in cryptocurrencies, such as Bitcoin, comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.
Investors should conduct extensive research into the legitimacy of each individual cryptocurrency, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. The cryptocurrency may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the cryptocurrency’s blockchain or other underlying technology. Some cryptocurrency transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.
- Investors must have the financial ability, sophistication and willingness to bear the risks of an investment and a potential total loss of their entire investment in cryptocurrency.
- An investment in cryptocurrency is not suitable or desirable for all investors.
- Cryptocurrency has limited operating history or performance.
- Fees and expenses associated with a cryptocurrency investment may be substantial.
There may be risks posed by the lack of regulation for cryptocurrencies and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies. Investors should conduct extensive research before investing in cryptocurrencies.
Information provided by Van Eck is not intended to be, nor should it be construed as financial, tax or legal advice. It is not a recommendation to buy or sell an interest in cryptocurrencies.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
Related Funds
DISCLOSURES
Source: Messari as of 9/20/2023.
Important Information Regarding Cryptocurrencies.
The information herein represents the opinion of the author(s), an employee of the advisor, but not necessarily those of VanEck. The cryptocurrencies discussed in this material may not be appropriate for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any cryptocurrencies, or to participate in any trading strategy.
Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. References to specific securities and their issuers or sectors are for illustrative purposes only.
Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.
Investing in cryptocurrencies, such as Bitcoin, comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.
Investors should conduct extensive research into the legitimacy of each individual cryptocurrency, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. The cryptocurrency may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the cryptocurrency’s blockchain or other underlying technology. Some cryptocurrency transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.
- Investors must have the financial ability, sophistication and willingness to bear the risks of an investment and a potential total loss of their entire investment in cryptocurrency.
- An investment in cryptocurrency is not suitable or desirable for all investors.
- Cryptocurrency has limited operating history or performance.
- Fees and expenses associated with a cryptocurrency investment may be substantial.
There may be risks posed by the lack of regulation for cryptocurrencies and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies. Investors should conduct extensive research before investing in cryptocurrencies.
Information provided by Van Eck is not intended to be, nor should it be construed as financial, tax or legal advice. It is not a recommendation to buy or sell an interest in cryptocurrencies.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.