In today’s “Crypto for Advisors” newsletter, Dovile Silenskyte, Director of Digital Assets Research at WisdomTree, breaks down crypto indices for 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 method is the product.
Behind each index lies an invisible architecture – how assets are selected, how they are weighted, how often they are rebalanced, and what data feeds support them. These design choices don’t just shape performance. They define trust, transparency and product viability.
An index built on reliable data, verified prices and clear management becomes more than a benchmark. It becomes infrastructure. The line between a speculative token basket and an institutional index is drawn by design integrity.
The new rules for index construction
Crypto does not follow the same computer logic as stocks. Supply can be staked or locked. The liquidity lives across dozens of venues. Regulations can redraw the card overnight.
Illustrative supply comparison
Source: Artemis Terminal, WisdomTree. 12 November 2025. Historical performance is not an indication of future performance and any investment may decline in value.
This means that the construction of a crypto index is part data engineering, part management 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? This purpose shapes the eligible token universe, liquidity thresholds and rebalancing cadence. Go too wide and you catch noise; too narrow and you’re speculating, not benchmarking.
Strong indices force 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 emphasizes dominance – bitcoin and ether often have 80 to 90% of a market capitalization weighted index, while equilibrium 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 reconstitution results for October 2025 for the CoinDesk 20 Index family. 3 October 2025.
But weighting alone does not make an index future-proof. Maintenance does.
Crypto trades non-stop. Tokens branch, migrate and sometimes disappear overnight. Quarterly rebalancing, liquidity tests and concentration caps are not optional. They are survival tools. They ensure that an index remains investable and relevant when the underlying market shape changes in real time.
The institutional test
Index design is now the hidden frontier of crypto’s institutional era. This is where technical precision meets investor confidence. Rules-based, transparent indices, on the other hand, form the basis of 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 forecasting, 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 as of the production date 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 made and no liability otherwise arising for errors and omissions (including liability to any person due to negligence) is accepted by WisdomTree, nor any affiliate or any of their officers, employees or agents. Reliance on information contained in this material is solely at the 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 increase during stress events, but the spread can be massive over entire cycles. A meaningful crypto index simply avoids overweighting whatever has the largest market cap.
We are looking 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 Issuances
3. Actual fee registration (income)
The goal is not necessarily to eliminate volatility. It is to avoid a portfolio that unconsciously 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 acts 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 is a reasonable rebalancing plan for a crypto model portfolio?
A: Quarterly typically works best. It’s frequent enough to capture dispersion, but not so frequent that you’re exaggerating noise. For advisors managing through L1 Advisors, Safe or custodian platforms, rebalance when tokens cross pre-defined bands (eg BTC deviates by 10% from target weight). The discipline removes emotion from a highly emotional asset class.
Q: Where do you see the next big shift in index construction?
A: I see the industry moving from asset based indexes to cash flow based indexes.
Instead of “top 10 assets by size” we can see indices weighted by:
- protocol income
- yield efficiency
- validator economy
- restore demand
- Growth in RWA Collateral
This reflects the evolution from simple market value indices to smart beta in stocks.
– Eric Tomasewzki, Financial Advisor, Verde Capital Management
Continue reading
- Harvard University’s endowment has disclosed a $443 million stake in BlackRock’s iShares Bitcoin Trust (IBIT), making it the fund’s largest known equity position, accounting for 20%.
- The US Office of the Comptroller of the Currency issued guidance to banks that they may hold cryptocurrency for the purpose of paying blockchain transaction fees.
- New Hampshire approves first-of-its-kind $100 million bitcoin-backed municipal bonds.
