In today’s “Crypto for Advisors” newsletter, Dovile Silenskyte, Head of Digital Asset Research at WisdomTree, breaks down crypto indices, what they are, and discusses key considerations.
Then, in “Ask an Expert,” Eric Tomasewzki, financial advisor at Verde Capital Management, answers questions for advisors about building crypto portfolios using indices.
– Sara Morton
The Silent Cryptocurrency Revolution: Index Design
As institutions increase their exposure to digital assets, one simple reality becomes clear: in crypto, the methodology is the product.
Behind every index lies an invisible architecture: how assets are chosen, how they are weighted, how often they are rebalanced, and what data sources underpin them. These design choices don’t just determine 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 speculative basket of tokens and an institutional grade index is drawn by the integrity of the design.
The new index construction rules
Cryptocurrencies do not follow the same data logic as stocks. Supply can be staked or blocked. Liquidity lives in dozens of places. Regulations can redraw the map overnight.
Illustrative comparison of the offer
Source: Terminal Artemisa, WisdomTree. November 12, 2025. Historical performance is not an indication of future performance and any investment may lose value.
That means building a crypto index is part data engineering and part governance design. A well-built benchmark is not just a performance tracker. It is an investment framework.
It all starts with intention. Are you targeting broad market exposure or a specific narrative like decentralized finance (DeFi) or Layer 1 innovation? That purpose shapes the universe of eligible tokens, liquidity thresholds, and rebalancing cadence. If it’s too wide, it will pick up noise; Too narrow, and you are speculating, not comparing.
Strong indices impose discipline. Liquidity and size filters to prevent 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, separating investment benchmarks from theoretical ones.
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 an equal or limited weighting gives smaller protocols room to shine.
Side by Side Comparison of CoinDesk 5 and CoinDesk 5 Equal Weight Indices
Source: CoinDesk Indices announces final October 2025 reconstitution results for the CoinDesk 20 family of indexes. October 3, 2025.
But weighting alone does not make an index future-proof. Maintenance yes.
Non-stop cryptocurrency trading. Tokens fork, migrate, and sometimes disappear overnight. Quarterly rebalancing, liquidity testing, and concentration limits are not optional. They are survival tools. They ensure that an index remains investable and relevant as the underlying market changes in real time.
The institutional test
Index design is now the hidden frontier of the institutional era of cryptocurrencies. It’s where technical precision meets investor confidence. In contrast, transparent, rules-based indices provide the foundation for durable exchange-traded products (ETPs) that investors can truly trust.
To go deeper, read the full article: Market Insight: Crypto Index Construction.
IMPORTANT INFORMATION
This material was prepared by WisdomTree and its affiliates and is not intended to be considered a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell securities or adopt any investment strategy. The opinions expressed are current as of the date of production and may change as subsequent conditions change. The information and opinions contained in this material are derived from private and non-private sources. As such, no warranty of accuracy or reliability is given and WisdomTree, its affiliates, nor any of its officers, employees or agents accept any liability arising otherwise for errors and omissions (including liability to any person for negligence). Reliance on the information contained in this material is at the sole discretion of the reader.. Past performance is not a reliable indicator of future performance.
– Dovile Silenskyte, Head of Digital Asset Research, WisdomTree
ask an expert
Q: What makes a crypto index significantly diversified when everything seems correlated?
A: Correlation in crypto tends to increase during stress events, but the dispersion can be massive over entire cycles. A meaningful crypto index avoids simply overweighting whatever 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, staking rollover, real-world assets, and decentralized exchanges (DEX).
2. Sustainable symbolic emissions
3. Capture of actual rates (revenue)
The goal is not necessarily to eliminate volatility. This is about avoiding a portfolio that unknowingly follows a single narrative.
Q: Should Bitcoin remain 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 corporate-style dilution.
For most investors, bitcoin It serves as a risk control asset within cryptocurrencies, not a risk asset. We typically anchor portfolios with between 50 and 70 percent BTC, depending on risk tolerance. From there, we build satellite positions around thematic growth.
Q: What is a reasonable rebalancing schedule for a crypto model portfolio?
A: Quarterly usually works best. It is frequent enough to capture the dispersion, but not so frequent as to exaggerate the noise. For advisors managing through L1 Advisors, Safe or custody platforms, rebalance when tokens cross predefined bands (e.g. BTC deviates by 10% from target weight). Discipline removes emotions from a highly emotional asset class.
Q: Where do you see the next major shift in index construction?
A: I see the industry moving from asset-based indices to cash flow-based indices.
Instead of “top 10 assets by size”, we may see indexes weighted by:
- protocol income
- performance efficiency
- validating economy
- resuming the demand
- RWA collateral growth
This reflects the evolution from simple market capitalization indices to smart beta in stocks.
– Eric Tomasewzki, Financial Advisor, Verde Capital Management
Keep reading
- Harvard University’s endowment fund has disclosed a $443 million stake in BlackRock’s iShares Bitcoin Trust (IBIT), making it the fund’s largest known equity position, representing 20%.
- The US Office of the Comptroller of the Currency issued guidance for banks to hold cryptocurrencies for the purpose of paying blockchain transaction fees.
- New Hampshire approves first-of-its-kind $100 million bitcoin-backed municipal bond.
