Sorting Out the Crypto World
28 September 2023
In the crypto world, with over 22,000 coins, there is an increasing need for a rigorous classification system to help structure investment decisions.
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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