Unnecessary complexity is often one of the biggest challenges when it comes to analyzing crypto markets aligned to factor indices, particularly when those indices can sometimes consider 30, 40, or even 50 assets. 

With so many cryptoassets in play, trying to identify opportunities, evaluate risk, and size up potential can be difficult as errant and illiquid assets distort the big picture, and undermine the outcomes of any analysis. While there’s always a place for a wider view of the crypto ecosystem, when significant funds are at risk, you need to be sure that the assets forming the basis of your insights or products are both relevant and reputable. 

Whether those insights are used for benchmarking performance, justifying investment decisions, or guiding trader strategy, the reality is, the more assets you consider, the greater the risk of invalid or inaccurate outcomes. Beyond this limitation, excessive assets also limit the practical investability of indices you’re considering. After all, if you’re looking at insights from 50+ assets, the replicability of that index is going to be extremely low, undermining its practical uses beyond simple market signals. 

Streamlined, reliable, and replicable factor indices 

To avoid the unnecessary risks associated with overengineering, we’ve developed our factor indices with a view to reducing the complexity that comes with thousands of assets, down to just a few significant drivers. 

Composed of up to 10 assets each, these indices take a focused approach that ensures only the highest quality assets qualify. By focusing on premium assets, we’re able to drown out the market noise and deliver reliable insights that justify your investment, strategy or product build aligned to specific factors and priorities. 

Our first 3 flagship factor indices are:

The Kaiko LowVol Index
Minimizes portfolio volatility through inverse volatility weighting and includes the top 10 assets with the lowest volatility with quarterly rebalancing.

The Kaiko Momentum Index
Leverages ongoing patterns in short- and long-term price trends, and includes the top 5 assets with the highest momentum scores with monthly rebalancing.

The Kaiko Size Index
Captures size premium through inverse market cap weighting and includes the top 10 assets excluding btc with quarterly rebalancing.

what drives returns in crypto markets?

Each of these indices are built on investable universes, robust reference rates, and a taxonomy-aware research framework, offering evidence-based factor exposures to digital assets. Through these factors, we’re able to explain over 90% of market returns for BTC and 89% for ETH. This highlights the value highly-focused factor-based indices can deliver when it comes to projecting returns, whatever your use case. 

Learn more about the potential and build of streamlined, premium-focused factor indices in our index report: What Drives Returns In Crypto Markets?

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