Crypto’s Quiet Revolution: Index Design

In today’s “Crypto for Advisors” newsletter, Dovile Silenskyte, director of Digital Assets Research at WisdomTree, breaks down Crypto Indices, what they are and discusses key considerations.

Then, in “Ask an Expert,” Eric Tomasewzki, a financial advisor at Verde Capital Management, answers questions for advisors about crypto portfolio construction using indices.

– Sarah Morton

Crypto’s Quiet Revolution: Index Design

As institutions build exposure to digital assets, a simple reality is becoming 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 which data feeds underpin them. These design choices do not just shape 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 token basket and an institutional-grade index is drawn by design integrity.

The new rules of index construction

Crypto does not follow the same data logic as equities. Supply can be staked or locked. Liquidity lives across dozens of venues. Regulations can redraw the map overnight.

Illustrative supply comparison

Source: Artemis Terminal, WisdomTree. 12 November 2025. Historical performance is not an indication of future performance, and any investment may go down in value.

That means building a crypto index is part data engineering, part governance design. A well-built benchmark is not just a performance tracker. It is an investment framework.

It all starts with intent. Are you targeting broad market exposure or a specific narrative like decentralized finance (DeFi) or Layer 1 innovation? That purpose shapes the eligible token universe, liquidity thresholds, and rebalancing cadence. Go too broad, and you capture noise; too narrow, and you are speculating, not benchmarking.

Strong indices enforce discipline. Liquidity and size filters to avoid 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 as they separate investable 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 command 80 to 90% of a market-cap-weighted index, while equal or capped weighting gives smaller protocols space 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 Index family. 3 October 2025.

But weighting alone does not make an index future-proof. Maintenance does.

Crypto trades nonstop. Tokens fork, migrate, and sometimes disappear overnight. Quarterly rebalances, liquidity tests, and concentration caps are not optional. They are survival tools. They ensure that an index remains investable and relevant as the underlying market shape-shifts in real time.

The institutional test

Index design is now the hidden frontier of crypto’s institutional era. It is where technical precision meets investor confidence. Rules-based, transparent indices, by contrast, provide the base for durable exchange-traded products (ETPs) that investors can actually trust.

For a deeper dive, read the full paper: Market Insight: Crypto Index Construction.

IMPORTANT INFORMATION

This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.

– Dovile Silenskyte, Director, Digital Assets Research, WisdomTree

Ask an Expert

Q: What makes a crypto index meaningfully diversified when it all feels correlated?

A: Correlation in crypto tends to spike during stress events, but dispersion can be massive over full cycles. A meaningful crypto index avoids simply overweighting whatever has the largest market cap.

We look for:

1. Differentiated economic models or categories such as Layer 1s (L1s), Layer 2s (L2s), liquid staking, restaking, real-world assets, and decentralized exchanges (DEXs)

2. Sustainable token emissions

3. Real fee capture (revenue)

The goal isn’t necessarily to eliminate volatility. It’s avoiding a portfolio that unknowingly tracks a single narrative.

Q: Should Bitcoin still be 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 venture-style dilution.

For most investors, bitcoin BTC$85,738.51 serves as the risk-control asset within crypto, not the risk asset. We typically anchor portfolios with 50 to 70 percent BTC, depending on risk tolerance. From there, we build satellite positions around thematic growth.

Q: What’s a reasonable rebalancing schedule for a crypto model portfolio?

A: Quarterly typically works best. It’s frequent enough to capture dispersion, but not so frequent that you overtrade noise. For advisors managing through L1 Advisors, Safe, or custodial platforms, rebalance when tokens cross predefined bands (e.g., BTC deviates by 10% from target weight). The discipline removes emotion 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 indices weighted by:

• protocol revenue
• yield efficiency
• validator economics
• restaking demand
• RWA collateral growth

This mirrors the evolution from simple market-cap indices to smart beta in equities.

– Eric Tomasewzki, financial advisor, Verde Capital Management

Keep Reading

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