Index investing in the cryptocurrency realm involves purchasing ETFs and indices, both on traditional and decentralized exchanges within the growing Decentralized Finance (DeFi) sector.
A crypto index essentially represents a basket of diverse cryptoassets, forming a token tracking their collective performance. This basket might consist of coins from specific sectors, like privacy coins or utility tokens, relying on reliable price feeds, often facilitated by blockchain oracles.
Investors can leverage crypto indexes by, for instance, investing in a privacy coin index rather than selecting an individual privacy coin. This strategy allows them to invest in the sector while mitigating the risk associated with individual coins.
Tokenized index investing is poised to gain popularity, offering a more hands-off approach to navigating the blockchain and cryptocurrency markets.